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Articles:
Who has the Top Selling Video Game Console?
New Horizons for DTH satellite Expansion
DVD-R: RIP
Netflix’s Roku Success: What does it mean for the STB?
Camcorder Mess
Video Optical Discs: DVD vs Hi-Def
Mobile TV in the U.S.
Cable Ops: The Dumb Pipe Dilemma
Picture This
Anyone Going to Make Money on D-to-A Converter Boxes?
The Price of Inaction in the Digital World: A Cautionary Tale
Will Blu-ray ever be the next DVD? Read on to find out…
Archives:
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May - July 2008 Archives
Who has the Top Selling Video Game Console? Monday July 28, 2008 The Nintendo Wii may be flying off the shelves, but without a video optical disc drive, can they survive? Since it is highly unlikely that the Wii will add a video optical disc drive in the current generation’s console, the Sony PlayStation 3 (PS3) and Microsoft Xbox 360 are left alone to create growth in the video optical disc portion of the console market. And video game console shipments should reach their peak this year. Even though Microsoft made it onto the market first, the PS3 is poised to outsell the Xbox 360 this year. Price cuts, a Blu-ray victory, and a strong presence in the Asian market that Microsoft can’t seem to match give the PS3 a leg up. Also, the PlayStation 2 (PS2) is the best selling videogame console in history, and Sony hopes owners will soon upgrade to PS3 once shipments of the PS2 cease. It shouldn’t be too long before we start hearing about the next generation of these three consoles. It will be interesting to see if the Wii includes a video optical disc drive the next time around. But truthfully, Nintendo may not need to add an optical disc drive to keep ahead of the pack. The Wii is the only console that is a pure video game system without extra features, which is how Nintendo can keep its prices far below those of the competitors. The Sony and Microsoft are really pushing their media center capabilities lately, focusing on video downloads, HDTV, and Blu-ray capabilities. Those media options sound like a great selling point, but at those prices the Wii still leads the way with 50% of the estimated market share for 2009 shipments, and with no signs of slowing down. So could it be that simplicity is the way to stay ahead? 
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| New Horizons for DTH satellite Expansion Monday July 21, 2008 - Antonette Goroch With the North American and European Direct-to-Home (DTH) satellite markets having reached a near saturation point, where and how will the DTH satellite market find growth in a highly competitive pay TV marketplace?
India is where the industry is finding growth. But the growth will be of a different variety than the industry has experienced in the past.
India is fertile ground. It has one of the largest populations in the world, which counts some 120 million TV households (HH). In addition, there are now five DTH satellite services, up from just two in 2006. These services, which include both free-to-air (FTA) and pay segments, offer an improvement in channel capacity and quality in comparison to existing analog cable or terrestrial services which blanket the region. DTH satellite set-top box (STB) prices are coming down as competition heats up. In fact, as of mid-2008 Dish TV is offering a free STB with new subscriptions, speeding up subscription acquisition. Further, new government regulations instituting interoperable conditional access technologies and STB standardization, have provided programmers with a greater means to further monetize FTA households, as well as contributed to dropping upfront costs.
Despite the initial success, the market players are still working their way through some road blocks. Operators are experimenting with business models that can tap into the region’s demand for high-quality digital TV, while sustaining profits. Tata Sky, for instance, India’s first fully operational country-wide DTH satellite system, saw strong growth in subscribers after its 2006 launch, reaching 1 million in less than a year. This growth has tapered off in recent months, however, as Tata Sky has sought to tweak its business model to favor more pay channels and less FTA. The competitive environment makes such moves difficult however, as market pressures force operators to subsidize hardware costs and keep prices low. It was this reality that led rival service, Dish TV, to see record operating losses, even as they were cutting installation charges for new subscribers along with handing out a free STB.
One good thing about being the newest satellite kid on the block is that India is ripe for new-service implementations by those who are the most innovative competitors. Bharti Airtel, a division of the larger Bharti Teletech, plans to launch an MPEG-4 AVC based DTH satellite system this year. It’s rumored the service will be incorporated with Bharti’s broadband infrastructure for an integrated Internet/DTH satellite service. Not only do these plans help shape the fledgling DTH satellite market in India, they may serve as future models for satellite services worldwide.
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DVD-R: RIP Monday July 14, 2008 - Stewart Wolpin All the publicity surrounding the late battle between Blu-ray and HD DVD, along with the slow-and-steady rise of cable, satellite and IPTV box DVRs, has obscured the decline and near extinction of the non-PC DVD recorder. It seems only yesterday that DVD+R vs. DVD-R was the industry's most potentially volatile and damaging format war. In its heyday just two years ago in 2006, there were 24.9 million non-PC DVD recorders sold worldwide, representing a substantial 15% of all non-PC DVD sales. How times have changed. DTC estimates that non-PC DVD recorders now represent just 7% of all non-PC DVD sales, or 9.9 million units, further shrinking to 3% and 3.6 million units by 2013. DVD recorders were available by themselves or in combination with hard disc drives or VHS decks. This latter combination, the easiest way of dubbing old VHS tapes to disc, are the popular configuration of DVD recorder still on sale. While Toshiba, Panasonic and Sony remain the primary booster of DVD recorders, few new decks are being introduced. Most of the fringe manufacturers who hoped to capitalize on a once promising product category have dropped out of the market completely. The rise of the DVR has lead directly to the decrease in DVD recorder popularity. Just two years ago, less than 5 million STBs included a DVR, including 1.7 million non-DirecTV TiVo boxes, according to CEA. Currently there are still only 1.7 million TiVo-owned subscribers, but CEA projects nearly 16 million DVR STBs will be sold this year. CEA reports 25 percent of American homes have a DVR and The Carmel Group forecasts more than 50 percent of cable and satellite homes will include a DVR-equipped STB by 2010. DirecTV already reports 41 percent of its users have a DVR-equipped receiver. This speedy DVR adoption stands in stark contrast to the rapid drop in DVD recorder sales. DVR isn't the only culprit contributing to the demise of the non-PC recorder. Originally intended as a replacement for the VCR, a role obviously usurped by the DVR, the DVD recorder's primary usage evolved into a camcorder dubbing device. But the rise of DVD-based camcorders obviated the need for DVD dubbing. In spite of decreased importance, there are pockets of DVD recorder popularity. For instance, Japan is DVD recorder crazy; DTC estimates that 40% percent of worldwide DVD device units – and the primary reasons Japanese manufacturers continue to make DVD recorders – are sold in Japan. Japan is so DVD recorder crazy, it is the only market in which Blu-ray recorders are sold. Pioneer announced on July 7 it would start selling a Blu-ray recorder in Japan by the fall. According to Fuji Chimera Research Institute, Blu-ray recorder demand in Japan is expected to increase 18 fold to 3.6 million units by 2012. To paraphrase Monty Python, the non-PC DVD recorder may not be dead, but it was coughing up blood this morning. 
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| Netflix’s Roku Success: What does it mean for the STB? Monday July 07, 2008 - Antonette Goroch News that Netflix had sold out of their recently unveiled Roku set-top boxes(STBs), which allow users to stream movie content directly from Netflix to the TV via its “watch now” feature, in just three weeks has left many puzzled about what this means for the future of the STB and on-demand movie delivery. Rather than portending a future of more “Internet TV” devices that will compete with current set-top devices for consumer dollars and eyeballs, though, this is more likely evidence of the incremental evolutionary path of STBs which will come to include these technologies, and more, as content distribution becomes more fluid and multiplatform based. The Netflix STB by Roku is not the first Internet STB to hit the market in recent years. AppleTV and Akimbo, among others, have failed to gain much traction though, due to high cost of the units, and a lack of overall content availability. Netflix/Roku have found success where others have failed because their model is cheap (only $99), easy to use (connects right to a users existing Internet connection—no PC necessary) and plugs into an existing ecosystem of content/users (Netflix’s user base of 8 million+ customers and more than 10,000 movie titles). While these early returns are no doubt promising, they are more likely to offer a proof of delivery concept, and evidence of what consumers want in a service, rather than a new standalone product category. The argument that consumers don’t want a myriad of STBs each doing one thing littering their living rooms is a sound one. But already rumors abound that Microsoft is negotiating with Netflix to integrate the technology into the Xbox 360, which could be a boon for both companies, boosting Netflix’s user base and and enhancing the utility of the Xbox 360. Meanwhile, Netflix has also said it is in discussions with other consumer electronics manufacturers to integrate with DVD players and DVRs, and is seeking a broad-based ubiquity. Netflix’s motivations in these moves are clear. The DVD by mail market is expected to peak over the next five years, and Netflix will need to leverage its subscriber base into new modes of content delivery if it is to survive. If it can use the Roku technology to adapt itself into a variety of existing STBs through partnerships, rather than just the current standalone model, it will be well positioned to both survive and thrive. |
| Camcorder Mess Monday June 30, 2008 - Stewart Wolpin The camcorder market is in a time of transition right now, and HDD and pocket flash models are winning out over their more expensive AVCHD beer-can sized alternatives. Because of falling prices however, rising capacity and a smaller sexy size for flash media, the market will quickly be dominated by this popular format. Although DTC anticipates that flash will be the clear format winner by the end of our forecast period, the camcorder market is currently a mess. Considering all the recording formats (high def, standard def, VGA def) and media types (hard disk drive (HDD), DVD, MiniDV, imbedded flash, removable flash), and combinations thereof, there are nearly 24 different types of camcorders fighting for dwindling market share. Long gone are the days when consumers were limited to a choice between Hi8 and VHS-C. DTC estimates that in 2008, the worldwide camcorder market will total about 18 million units, 4 percent more than 2007. However, this increase is due solely to sales of sub-$200 compact flash camcorders such as those made by Pure Digital; sales of so-called mainstream models from traditional market leaders Sony, Canon, JVC, Panasonic and Samsung have dropped almost 19 percent from about 14.8 million units in 2007 to a projected 12 million in 2008. And the sales situation doesn't figure to improve for the top makers as they drift increasingly toward higher-priced models; in 2009, DTC estimates worldwide sales are expected to increase another 4 percent, but sales from the top five will drop 6 percent. Even with the low-priced flash insurgence, the leading camcorder media is HDD. But HDD's plurality isn't likely to hold, and the cost of low capacity blank media is depreciating the perceived value of DVD models. Last week, JVC became the fourth top 5 camcorder maker to announce a flash-based AVCHD model, leaving only Samsung of the top five camcorder makers resisting the AVCHD surge. While AVCHD models currently represent only 4 percent of all camcorders sold in 2007, the combined marketing efforts of Sony, Canon, Panasonic and JVC is likely to boost AVCHD's market share to 16 percent next year. Flash memory also offers greater advantages to consumers. Flash-based camcorders, either with embedded flash, removable flash or both and regardless of video resolution, are smaller, lighter and sexier than their bulkier HDD counterparts. Consumers have already shown a desire for sub-$200 palm-sized flash-based camcorders from Sanyo, Aiptek and models made by or licensed from Pure Digital, which continue to eat into the market share of the traditional camcorder market leaders. Finally, flash memory prices continue to drop like a cement-weighted stool pigeon in a murky river. At some point in the next two-to-three years, prices of high-def flash models from the top four makers will draw even with current HDD models. |
Video Optical Discs: DVD vs Hi-Def Tuesday June 24, 2008 Electronic distribution may be the way of the future, but physical optical discs are still shipping at strong rates. About 5.5 billion pre-recorded video optical discs will ship in 2008. North America dominates both the DVD and Hi-def video optical disc markets, claiming about 47% of all video optical discs shipping in 2008. Even after DVD discs hits saturation around 2009, the shipment numbers will far outweigh those of the other optical disc formats, such as Hi-def and UMD. Advanced Optical Disc (AOD) shipments will never achieve the mammoth numbers that DVD achieved in its heyday. As the chart shows, by the end of the forecast the two different optical disc types, DVD and AOD, barely get close to meeting up in the middle, with billions of disc shipments separating them. Electronic distributors are making huge strides with content sales on the PC, but the content rarely leaves the PC itself. So until electronic content is more easily available on the television set, video optical discs still have the run of the household TV set. 
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| The Weekly Riff: Technically Not a Blog will not be posted Monday June 23, 2008, but instead will be posted on Tuesday June 24. |
Mobile TV in the U.S. Monday June 16, 2008 Will Mobile TV finally give U.S. broadcasters some return on their digital TV investments? Ten years hence the dawn of digital terrestrial TV and broadcasters still haven’t figured out how to profit from it. Enter mobile TV, and now broadcasters may see a way to capitalize on it, but will they succeed? A smattering of U.S. mobile TV services has deployed, all of which require subscription fees and none of which are offered by incumbent over-the-air broadcasters. The number of subscribers appears to be modest at this point but it’s much too early in the market to keep strict score. But DTC believes that terrestrial broadcasters who offer free, ad-supported content to mobile devices are in a position to finally get a return on the millions of dollars they’ve sunk into building the digital TV transmission infrastructure. At least their brethren in Korea and Japan are finding a healthy viewership for their ad-supported mobile TV broadcasts. In fact, these free services are running rings around subscriber-based broadcast-based mobile TV offerings. Digital Tech Consulting estimates that 85% of worldwide mobile TV users get free, ad-supported signals. Apparently, people are so accustomed to ads being on the television that they don’t mind them appearing on their mobile device as well. So far U.S. mobile-telephone service providers Verizon and AT&T (both use the MediaFlo platform) have opted to employ the subscription business model for their over-the-air mobile TV channels. DTC estimates that there will be about 20 million subscribers to pay mobile TV services worldwide in 2008, increasing to more than 40 million by 2012. But considering that 20 million subscribers is only 15% of the overall population of mobile TV viewers, U.S. broadcasters may be wise to stick to their tried and true stationary TV business model of selling advertising for new mobile TV services. Much of the success of mobile TV in other countries hinges on a large number of public-transport commuters. But America’s automobile society doesn’t foster a large public-transport commuter population and that could seriously limit the number of mobile TV users willing to add another subscription fee to their monthly budgets. 
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| Cable Ops: The Dumb Pipe Dilemma
Monday June 9, 2008 - Antonette Goroch When it comes to new media content delivery, are cable companies just providers of a “dumb broadband pipe”? In their traditional roll of delivering TV programming, operators don’t just sell hook ups to the pipes; they sell the stuff that flows through the pipes. That doesn’t take away from the rewards of selling just the hook up to the Internet. For nearly 10 years cable operators have deftly taken advantage of selling high-speed Internet access (with the Internet’s free content) hooked up to their big pipes thus locking in one of the few rock-solid revenue streams -- plain old access. This revenue stream is now a staple for cable operators, bolstering revenues and subscribers, even in the face of significant competition from satellite operators. But times have changed. As the Internet becomes ever more entertainment-content rich, cable operators, as mere access providers, find themselves left outside of the magic revenue circle. For decades they’ve enjoyed the dual revenue streams of content tiers and advertising in their core TV business. Unembellished access service is a nice revenue stream but it can’t compare to the potential revenue from selling Internet content and advertising. This is the dynamic surely at play in Time Warner Cable’s recent foray into metered Internet usage. In a market test, Time Warner Cable is placing a fixed level of usage for its broadband service with additional charges for overages. In this way, Time Warner Cable hopes to hone in on the “five percent of subscribers who use up half the capacity.” You know those pajama-clad peer-to-peer and Slingbox bandwidth pigs frequently parked in front of their computers. The problem with this approach, and ultimately why it probably won’t succeed, is that this 5% are heavy users of content (whether it be free or paid). (Couch potatoes of the future perhaps?) By making its access product less attractive to those who consume more content, and in effect discouraging greater content consumption, Time Warner Cable puts itself in the position of alienating those very consumers who represent the future of on-line content and advertising revenues it would love to cash in on. More importantly, as Internet entertainment content becomes ever more available, people will demand more bandwidth. Placing punitive limits on bandwidth will only make a cable operator’s access product less attractive in a highly competitive market. With telcos poised to nip at cable’s heels with a triple play package of their own, cable operators can’t afford to diminish what has become a fundamental part of their business. |
Picture This MondayJune 2, 2008 - Stewart Wolpin Every once in a while the tech world gets jolted by a simple, low-tech product that fulfills some latent desire. The compact audio cassette and the VCR are good examples. This latest low tech surprise is the digital picture frame. They're more 19-inch TV drab than flat panel cool. Many are cobbled together mostly in China using spare, old or even used LCD panels, off-the-shelf components and user interface programming your 12-year-old could have written. Despite their lack of “it product” status, they are flying off the shelves. DTC estimates that the total market for digital picture frames has more than doubled in each of the two years the frames have been available, expanding from about 11 million units worldwide in 2007 to an estimated 24 million units in 2008.  As with any new product, new brands have bobbed to the surface. The most prominent is Pandigital, which DTC estimates will be the top seller of digital picture frames in 2008. But as the digital picture frame market develops, older, more well-known brands will jump to the fore. The most well-known brand in the photo field is, of course, Kodak, which DTC estimates has already moved into the number two slot. Kodak's share is bound to grow thanks to the industry's first bit of sophisticated symbiosis. Earlier this month, Kodak started selling its frames with a free offer to pre-load up to 100 pictures a consumer has uploaded to his Kodak Gallery online photo storage account. This service eliminates the most vexing aspect of digital picture frame functionality, loading in pictures. This is especially critical since the products aren’t designed, or marketed, to appeal to tech enthusiasts. As the digital picture frame market grows – DTC estimates that unit shipments will reach about 43 million by 2010 – competition will push frame makers to improve their products, add features such as video capabilities (now available on about 13 percent of models), and simplify the user experience. We also expect the entrance of additional manufacturers into the category, especially other digital camera makers. Currently, Kodak is the only digital camera maker among the top 10 digital picture frame market share leaders. We also expect that once Kodak's picture frame/Kodak Gallery gambit pays off with increased market share, other frame makers will seek partnerships with unaligned online photo sites. Digital picture frames may not be as fashionable as flat panel HDTVs, but they will soon be more ubiquitous. |
Anyone Going to Make Money on D-to-A Converter Boxes? Tuesday May 27, 2008 DTC’s analysis of converter-box costs paints a pretty grim picture for manufacturers and retailers hoping to make money selling converter boxes for the U.S. analog TV shut-off next year. Those selling the boxes at or near the government-issued coupon value of $40 will realize miniscule profit. So, coupon in hand, we went to a Best Buy store last week to see if we could walk out with a box without having to open a wallet. Our buyer walked out empty handed because she didn’t want to spend the $59.99 Best Buy required for its box. After a little digging, she found places to buy a converter box for around $43 discovering that even this early in the transition, consumers can buy for just a few dollars over the coupon amount. So how much did it cost to make those $43 converter boxes? DTC’s analysis of general component and royalty costs points to a total bill of materials and royalties of about $28-$32 per box. These are estimated costs for the boxes’ major components and don’t include assembly, shipping and tariff costs. It also doesn’t account for any markup by manufacturers or retailers. About $18 is attributed to component costs with about $12 attributed to licensing fees. DTC does believe that some participants will realize benefit despite the dismal profit picture. TV suppliers and retailers who can convince D-to-A converter box shoppers to upgrade to a $40-discounted digital TV instead of buying the box will likely make better margins on the TV sale. And, assuming that all the converter box makers play by the rules, the owners of the technology intellectual property that goes into the boxes should enjoy a nice spike in licensing revenue in 2008 and 2009. |
The Price of Inaction in the Digital World: A Cautionary Tale Monday May 19, 2008 - Antonette Goroch What can the video industry learn from its music-industry cousin about digital distribution of its products? That inaction can result in irreparable damage. Attendance at the National Association of Recorded Music’s (NARM) annual convention held last week brought together music-business participants who are still stumbling through the transition from traditional to new distribution of their products. The event, held in San Francisco, where the giant downtown Apple Store cast a long shadow over the gathering was a fitting illustration as to why the packaged music media business is in such dire straits, and how continued inaction can only bring more turmoil to the business. Indeed, Apple’s iTunes, which just surpassed Wal-mart as the largest retailer of recorded music, provided a fitting backdrop for the event, which this year included “Digital NARM”, a subset of the conference focused exclusively on digital distribution issues with representatives from companies like Napster, MySpace, Sandisk and Motorola. While the context for this discussion was music, the issues are the same in the video world—how to preserve the core businesses, while embracing new distribution models and strategies. There were familiar debates--- How DRM can decrease or eliminate piracy while facilitating a valuable customer product and experience…What business models and price points work for both the customer and distribution value chain…What are the new modes of delivery for content via mobile and Internet…What are the roles of social networks and Web communities in content sales… But the music industry (like the video industry) still seems stuck in these debates, with very little resolve, as the large players focus on experimentation rather than full scale implementations of digital distribution strategies. The price of such inaction is clear, and serves as a cautionary tale for the video entertainment industry---continued declines in CD sales and billions of songs downloaded for free over peer-to-peer networks by a new generation of consumers, even as legal digital distribution sales reach record levels. The chart illustrates how electronic distribution of video will be a significant part of the video-entertainment landscape. Although pre-recorded DVD discs will continue to ship in the billions of units annually, there will be little or no growth in the DVD business, while iTunes video sales will experience significant growth. And Apple is not the only supplier, although it is currently the largest one.  |
Will Blu-ray ever be the next DVD? Read on to find out…Read on to find out… Monday, May 12, 1008 - Stewart Wolpin Now that Blu-ray has won the high-definition DVD war, the expectation was that sales would explode and that in a few years, Blu-ray decks would outsell even standard definition DVD. However, not only haven't sales of Blu-ray decks substantially increased, but DTC does not expect Blu-ray to represent any more than a third of all DVD devices sold five years hence. DTC estimates that in 2008, global non-PC Blu-ray deck sales will represent only 3 percent of all DVD devices sold. DTC believes this percentage will increase to only 31 percent by 2013. There are several market-specific reasons why Blu-ray will not replace DVD. But historically, no mainstream media format has ever been replaced by a slightly improved compatible product. For instance, digital audio tape could not displace the compact cassette, S-VHS did not supplant VHS, and neither SACD nor DVD-Audio replaced the CD. Blu-ray presents no practical advantage over standard DVD such as added convenience or longer play, as was the case when vinyl records replaced wax, CD replaced vinyl and DVD itself replaced VHS. Blu-ray's success on any level is predicated on two primary factors: HDTV ownership and price. Only owners of HDTVs are likely to even consider a Blu-ray purchase. Only those owners who can afford 50-inch and larger HDTVs are likely to be able to afford a Blu-ray deck. It also is unlikely companies that market lower-end or portable DVD players will enter the higher-priced Blu-ray device market for many years. Without the price competition the presence of these brands often incite, Blu-ray prices will remain two-to-three times higher than standard DVD product. |
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