DTCReports.com: The Weekly Riff: Technically Not a Blog

Here’s a little forecast snapshot as we look ahead to new video disc formats and how they will stack up against the highly successful DVD format. Growth of pre-recorded DVDs will continue to slow and take a sharp turn south by 2013. Only Blu-ray and other pre-recorded disc formats will log growth in the forecast period. In January, DTC will publish the third edition of its The Video Optical Disc, Devices and Media: Worldwide Shipmentsreport which is a data-intensive report that provides detailed worldwide forecasts of the Video Optical Disc devices and media market. DVD and Blu-ray devices, DVD PCs, video optical disc videogame systems, and pre-recorded discs are forecasted through 2013. For more information please contact us at info@dtcreports.com

A consumer goes into a store to buy a camcorder. On one shelf are AVCHD or HDV camcorders from Sony, Canon, JVC, Panasonic and Samsung, which list for around $1,000.

On another nearby shelf are HD camcorders that are $250 or less, are about the size of a deck of cards, and look (and are) really simple to operate.

The consumer knows that the Sony, Canon, JVC, Panasonic and Samsung camcorders are better. But four times better?

I'm willing to bet two things. First, these cheap HD camcorders will sell as well if not better than traditional HD camcorders in Q4 in the U.S., and, second, they will come to dominate the worldwide camcorder business in the coming years.

Traditional camcorder manufacturers derisively refer to these cheap camcorders as "toys." But this dismissive attitude sounds achingly familiar to the way the Big 3 automakers dismissed the then-new tiny gas-efficient foreign imports back in the day. We all know how that hubristic attitude worked out.

These "toy" HD camcorders are a relatively new phenomena and their availability is mostly confined to the U.S. market at the moment. It's only been in the last month or so that Creative Labs announced its Vado ($229.99) and Flip its MinoHD ($229.99), and Kodak started selling its Zi6 ($179.95), all of which join the previously introduced DXG 567V ($179). All capture either 720p or 1080i video using H.264 compression to flash memory, either built-in, to a removable SD card, or both, run on a couple of AAs, have a tiny LCD view screen, a flip-out USB jack for simple PC/Mac connections and cheap plastic lenses.

These four models are likely to be joined by others from other manufactures, some well-known some unknown, and likely none from Sony, et al. As time goes on, flash-based "toys" will not only outsell higher-end HD camcorders, but $250-plus standard definition models from Sony, et al, as well. In a couple of years or so, standard definition camcorders will disappear and the all-HD camcorder market is likely to split similarly to the digital camera world. These HD "toys" will become the predominant point-and-shoot market while HD models from Sony, et al, become the analogous D-SLR high-end.

Like the digital camera world, consumers know that HD camcorders from Sony, et al, capture far higher quality video. But for a quarter of the price and point-and-shoot operational simplicity, the video these new "toy" camcorders capture will more than just suffice, and will become the camcorder business.

New media technologies always bring with them the specter of cannibalizing existing markets for existing players. Certainly this was the case with the introduction of the DVD, and television before that. The more recent rising tide of Internet TV is no exception to this rule.

In the case of Internet TV, the specific reasons for this fear, of course, are multifaceted, ranging from content protection to the disruption of existing content distribution chains, but the core issue is the same: new technology holds opportunity, but core assets must be protected.

For years this fear has led to reticence among mainstream content providers in really embracing the potential of Internet video distribution. But, as we’ve discussed in this space before, there has been a sea change in this trend during 2008, with a variety of basic cable network, broadcast network and major studio movie content now available through multiple sources on the Internet, whether free/ad supported (Hulu, Joost), pay-per-view (Amazon.com), or pay per download (iTunes).

Not surprisingly, with this expansion of content availability, Internet video usage has grown significantly. A recent IBM survey of 2,800 consumers in six countries, conducted online in the third quarter, found that 76% of people have watched Internet video in 2008 compared with just 60% in 2007.

Has this diminished traditional TV viewing? The major broadcast networks say it has not, citing TV viewing across demographics as being up 8% since 2000. NBC recently stated it had record viewership of 214 million during the 2008 Olympics, even with 3,000 hours of video available online. While still too early to say, it appears that Internet video will likely serve to grow the total viewing audience across platforms, rather than cannibalize existing ones—as was the case with both the DVD and the TV.

Still, its effect on the overall market is likely to be a dramatic one in certain key respects. Branding will become increasingly important as viewers seek familiar content across platforms. The ability to time shift with more on-demand availability is also likely to continue to increase in importance as viewers become more accustomed to a personal level of control. Ultimately, it will be the ability to adapt to these changing tides, not prevent them, which will prevent cannibalization.

Details are beginning to emerge on the upcoming Advanced Television Systems Committee-Mobile/Handheld (ATSC-M/H) standard, AKA mobile DTV.

Once implemented, ATSC-M/H will enable consumers to receive local digital TV broadcasts on a variety of devices via either a built-in tuner or an add-on tuner dongle.

ATSC-M/H, based primarily on technologies from LG and Samsung, is currently in the "Candidate" Standard period and is being voted on by ATSC members. The balloting closes Nov. 25 and the standard is expected to pass, which opens the door for immediate product development.

Even though it has not been ratified yet, the broadcasters are already performing field testing. And equipment suppliers are already developing receivers and infrastructure equipment. The accelerated time table is designed to get mobile broadcast on the air as early as possible in 2009.

Expect to see product prototypes at CES, products which could include the first cellphones and Portable Media Devices (PMP) with built-in ATSC-M/H reception capabilities, USB dongles to enable laptops to be used as TVs, or even standalone handheld mobile DTVs.

Hollywood holds the power when it comes to the future of FireWire. But is this fast transport technology too fast for movie studios afraid of piracy?

FireWire is technologically superior for moving video when compared to other available options such as USB or HDMI. Unlike the bulky, uncompressed video of HDMI, FireWire compresses the video, making it far more versatile and fast in its transport. Unlike USB, which is tethered to the computer or host in its use, FireWire allows device independence and does not require a computer to “control” the interaction between devices.

One might think these attributes would make FireWire a favorite of CE companies, but Hollywood’s cool reception and higher chip costs have resulted in a dwindling use of FireWire in TVs and other CE products. Because of this, USB and HDMI have become ubiquitous in digital video products across the spectrum of HDTVs to set-top boxes, computers and peripherals, while FireWire has remained confined to a niche of high-end professionals/prosumers who work with video.

The one exception to this is in the U.S. digital cable market, which carries an FCC mandate that FireWire (and HDMI) be included in all HD STBs. While all other deployments of FireWire in digital STBs have been halted, the U.S. market has been quietly amassing a rather large installed base of FireWire STBs. Indeed, between the FCC requirement and the aggressive promoting of HD by cable operators, DTC estimates than nearly half of the digital cable installed base currently has at least one HD FireWire STB. Despite this, FireWire remains largely unused in the majority of these households, except by enthusiasts willing to seek out the needed drivers to make it work (somewhat ironically, the most likely group to engage in piracy).

The looming question is whether or not cable MSOs in the U.S. will begin to seek out ways to eliminate the 1394 requirement with the FCC. After all, why should they include the extra cost if it is unused? To date, they have not shown an interest in pursuing that, but it remains an open question for the longer term.

In the meantime there are still those that would like to see Hollywood’s fears assuaged and the potential of FireWire in the home video context realized. The most likely scenario is through the High-Definition Audio-Video Network Alliance (HANA). The association, formed in late 2005, showed promise during 2007 with members such as Samsung, Cablevision, Charter, JVC, Mitsubishi, NBC Universal, Sun Microsystems, Texas Instruments and Warner Bros. throwing their support behind the HANA effort. Despite these efforts, no actual products have shipped commercially to date. A new reference design unveiled in August, which more tightly integrates Internet content delivery within the coax environment, could breathe in new life. A cornerstone of the new design is ASCCT, a copy protection technology from IBM, which allows security and managed copying among both new and legacy HD products.

One thing is certain, though FireWire’s attributes are clear, the ultimate success or failure of FireWire in the home video context will ultimately rest with Hollywood’s approval. If this occurs, the U.S. cable market may provide a model for interoperable, networked HD home video products in growing markets worldwide.

When DVD was first introduced a little more than a decade ago, it was assumed that recordable DVD, when it dropped in price sufficiently, would replace the VCR.

But a funny thing happened on the way to DVD recording price viability – well, actually, a couple of things. The DVD recording format was beset by a recording format war (remember "plus" v. "dash"?) which was followed by the introduction of the DVR, both events occurring around the turn of the century (the 21st).

By the time the DVD-R format war was over and DVD-R hardware prices had dipped to popular price points, the DVR, had effectively replaced the VCR. After a couple of years of robust sales, sales of DVD recorders have steadily declined the last couple of years. In 2007, sales of DVD recorders represented 9% of all non-PC DVD hardware sales, dropping to an estimated 7% this year and an estimated 6% in 2009.

Most of these sales are in the DVD-R-mad Japanese market. Only a half dozen companies even stock multiple DVD-r SKUs – Panasonic, Toshiba, Sony and Philips.

Blu-ray seemed at first to follow the same path as DVD as far as recording is concerned. The introduction of play-only BD players immediately sparked speculation of the introduction of BD recorders. But with the U.S. market buying into DVRs, manufacturers have felt no compunction to bring Blu-ray recorders to market anywhere but in Japan, Australia and other limited Pacific Rim markets.

Until now. At CEATEC in Japan last month, Panasonic, Pioneer and Sony each announced enhanced Blu-ray recorder models, most with 1394 connections for transfer of MiniDV footage, or at least that's what we assume.

While Sony's six models are intended only for the Japanese market, Pioneer and Panasonic have both announced their intentions to market Blu-ray recorders in Europe sometime this year in limited markets; Panasonic's deck is targeted only for France, for instance. There also are reports that Panasonic will be the first to sell a Blu-ray recorder in the U.S. in the first half of next year.

How will BD-R decks be received outside of their current comfortable Pacific Rim markets? Probably not enthusiastically.

Obviously DVRs already occupy the place of VCRs for both standard and high-definition recording. Many high-end PCs include BD recording capabilities to fulfill video editing needs. While BD-R deck prices have dropped to less than $1,000US (a Sharp model is selling for $899US, but most of the new models will be priced much higher) sales are likely to be low. A new Panasonic BD-R deck currently sells in Australia for $2,299AUS. The worsening worldwide economy and the precipitous drop in the U.S. dollar won't help matters, either, especially in the U.S.

Blu-ray recorders will likely generate some initial excitement if and when they arrive in Europe and the U.S., but they likely will occupy only a niche market.

Everywhere you look someone is trying to cram more functions into a single device. From cell phones that moonlight as music players, to video game systems that playback high definition video, all the way to refrigerators with built in televisions and internet access, convergence is all around us. The reasons and benefits coming from convergence are obvious, but will all consumers buy into this obvious and efficient trend?

Apple introduced an MP3 player that also played video to the masses in late 2005, and since then sales of Personal Media Players (PMPs) have exploded. And now the PMPs have morphed with the mobile phone. Despite the popularity of the iPhone and other Swiss Army knife-like devices, the stand-alone PMP market is still quite strong. In fact it is rapidly taking over the audio-only player.

The PMP market will continue to grow over the next four years, going from 60 million in 2007, to 107 million in 2011. Video capable PMPs will become increasingly more common as the cost to add the capability to PMPs goes down and consumer demand goes up.

It’s going to take a lot more than just the availability of these devices for convergence to fully take over. Yes, I am aware that my iPhone doubles as an organizer and an iPod, but I haven’t loaded a single song or video onto it. Why is that? It could be because my dedicated iPod is still in good working condition, or maybe I’m afraid of losing everything at once if the device fails, or just don’t yet think of my phone as a place to listen to music and watch movies.

For the next few years people are going to continue to carry multiple devices around when they could carry one fully converged device despite the convenience and efficiency. It could be that consumers will replace dead iPods with a multifunction device rather than another basic MP3 player. People have already begun to use their PlayStations as home entertainment centers, so it’s not as if they don’t get the two-in-one concept. Consumers will eventually get used to having one handheld device rather than two or three, but for now the PMP market has nothing to worry about.

As mobile carriers compete for bigger and better content offerings, is it the big companies or the consumers who benefit in the end?

With some 3 billion worldwide users, the mobile content delivery platform is coveted territory. To date, service providers have been strict gatekeepers with their subscribers, reaping the huge profits from an array of ringtones, screen savers and games. The next frontier, of course, is video content, and already there are a growing variety of mobisodes, TV episodes and even movies available from virtually all carriers. With the advent of mobile broadband the next frontier could be far more complicated.

The idea of “over the top” content delivery (bypassing the service provider network) has been simmering in the world of pay TV for some time, as operators seek to balance the advantage of offering broadband data services with the possibility that users could begin to use that connection to get content competitive to regular pay TV packages. Mobile operators are now doing a similar balancing act, seeking to make use of 3G and 4G network infrastructures for attractive mobile broadband access while trying to make the most out of direct content sales. Some providers, such as Sprint, have embraced the idea of “open access”, using the availability of third party Internet content as a selling point, while others, such as Verizon, have limited access to mobile broadband and seek to beef up their own walled garden of content.

The momentum is unmistakable, though. Mobile broadband users grew from just 11 million last year to more than 50 million in 2008 and are growing at about 4 million users per month, according to the mobile industry trade group, the GSM Association. Regardless of how operators choose to slice the pie, DTC believes that the big winners in this equation will be consumers, who will have access to far more content than any walled garden could ever provide.

Toshiba will not be joining the Blu-ray camp any time soon. Considering how much high-def content is now being downloaded, streamed and available via broadcast, this is probably not a bad strategic decision.

While Blu-ray remains the hottest and highest-quality movie playback system, DTC estimates that the non-PC Blu-ray devices will only account for around 12% of the total video optical disc devices market by 2010.

Instead, the former HD DVD hawker is investing, along with MOD Systems and NCR, in a new HD download/streaming system to take advantage of this content download trend.

It may not be the technology, but the logistics of this new system that raises questions about the strategic soundness of Toshiba's new non-HD DVD, non-Blu-ray direction.

MOD Systems and NCR are developing retail kiosks to enable consumers to download and transfer video content to a variety of portable devices compatible with Windows Media DRM and native SD security (i.e. not iPods or iPhones) and/or to SD memory cards. The theory? Philips executives say that they believe that SD slots will be pervasive in all consumer electronics devices.

MOD Systems is currently in discussions with all major studios for video content. Pilot systems will go into operation later this year and the full launch is scheduled for Spring 2009. MOD Systems' goal is to deliver content to the consumer within three to five minutes.

Initially, content will be available only in standard definition, but the service may also be applied to downloads of high definition content in the future, Content will be encoded with Windows Media DRM and native SD security.

Early next year, Toshiba will unveil a new set-top box to play back these store-burned SD cards.

We have a lot of questions. First is cost. A consumer will likely need at least a 1 GB card to store most of these compressed high-definition movies, probably 2 GB. The cost of a 1 or 2 GB card combined with the cost of the content could cost around the same as a Blu-ray disc. That's without knowing the comparative quality, availability of content extras, playback on other non-Toshiba compatible devices, and DRM issues

The appeal of downloading content rather than purchasing a pre-packaged standard definition DVD or Blu-ray is the convenience of acquiring high-definition content without leaving home.

Admittedly, this is a gut-reaction to a single thin-on-details press release and other equally-deficient news reports. We'd like to see a bit of the blanks filled in. But we can only hope Toshiba at least includes a download-at-home component to this SD scheme.

After scatter shot and mostly token efforts to make their content available over the web, mainstream TV and movie programmers are finally taking the Internet seriously. The Internet won’t displace DVD and pay TV as a primary distribution channel, but most traditional content providers now recognize that the Internet will someday be a big dog on the content-distribution block.

The 2009 fall TV season marks a turning point for Internet video with a record number of new/first run movie and TV titles available, and additional ways to purchase and view content. This will go far in breaking down select barriers standing in the way of commercial success for Internet video content.

Last year, the Apple iTunes store dominated the pay-per-download movie market with nearly 70% marketshare, and was virtually alone in offering TV episodes from basic cable networks, accounting for some 90% of video downloads. This year Apple has beefed up its movies and cable network TV show library and now includes rentals. Apple is joined by the Amazon VOD store, which offers a library of first-run TV and movies for purchase or rental. Meanwhile, companies like Hulu and Joost, as well as TV networks, are offering a variety of free, ad-supported TV episodes and clips. Content providers are releasing the same libraries across these outlets, timing these releases with other pipelines (such as broadcast or pay TV). In essence, they are now conceding that the Internet is a viable incremental distribution channel instead of just a threat to their existing business.

The “net conversion” isn’t complete, however. Most web offerings fall under the “walled garden” business model and a lot of content is confined to the PC. But the shift is clear. Many mainstream content providers now have coherent strategies for Internet distribution that include high-quality content both in terms of video quality and production values. This is certain to drive usage and help make the business case for commercial video over the Internet, which will be key in compelling content providers to further loosen the reins on their online offerings.

Even though the first Google Android phone has been unveiled – the T-Mobile G1 – there are still many questions about both its initial and its ultimate functionality and capabilities.

After a brief exploration of Android, there seems to be a lot of function and capability missing. But the theory is developers will write programs addressing any consumer needs or desires and the Android operating system itself can be upgraded.

All of this speculation is premature, however. There's still a month to go before the G1 is actually available (October 22) and the Google Android Market application download store opens.

But what can we project about how Android will affect the video download and streaming market?

In the short term, it will have little affect. First, the G1 is merely the first Android-powered device. There certainly will be more, including some non-mobile phone devices. An Android-enabled cell phone is due out from Sprint early next year, but there haven’t been any announcements. And while Verizon has aligned itself with LiMo, the Linux open source mobile OS, and AT&T has the iPhone, nothing stops either carrier from adding an Android phone to their portfolio in the future. Critical mass will be, well, critical, for Android to have an impact on the video download or streaming market.

Second, Google has partnered with Amazon for music and video purchases. It makes sense, therefore, that Amazon has already confirmed an Android mobile music and video store.

It'd be better for their partnership and Amazon's aim to compete with iTunes, if the Amazon video player were part of the Android operating system rather than a separate application, but it's way too early to speculate on how this will, excuse the pun, play out. Developers also are likely to build CinemaNow and Netflix player apps, or apps to play back QuickTime, and DivX files, but who knows when – or if – that'll happen.

What we can project is that Android's ability to impact Apple's hegemony over the downloadable movie marketplace is hampered by the G1's carrier.

T-Mobile, with around 30 million subscribers, is the smallest of the four major cellphone carriers. AT&T, the largest, has around 65 million subscribers. So not only does iPhone have a 10 million unit installed base head start on the G1, the iPhone's potential sales base is more than twice as big, at least in the U.S., as the G1.

Also, T-Mobile just launched its 3G HSDPA service in the U.S. 3G is an absolute necessity for downloading large video files over-the-air to an Android device. Right now, T-Mobile has 16 3G markets active, and plans to have 22 when the G1 launches and 27 by mid-November. That's fine, but AT&T has more than 300 3G markets, and likely 350 markets by the end of the year.

Downloading movies to your desktop for transfer to the G1 may not work, either. Even if the G1 included the correct DRM technology, there is no Android desktop syncing program a la iTunes to ease content transfer.

Of course, someone – even Google – may build an Android desktop syncing application, along with all the other necessary video decoders for playing back the wide variety of video content available.

The nature of Android itself – a completely open operating system – could cause a seismic shift in the portable media player and downloadable video marketplace. In two or three years, Apple and iTunes may be fringe providers, overwhelmed by a flood of Android-powered devices and the availability of myriad downloadable video streaming or player apps.

But we're getting ahead of ourselves. At the moment, Android provokes more speculation than actual business. Steve Jobs can sleep soundly, at least for a little while.

The spotlight is now on mobile content after the initial buzz of network capacity and devices. The next focus should be on getting the business model right.

This was evident at the CTIA wireless show in San Francisco this week, with an array of announcements and initiatives for the U.S. mobile market focusing on more video content, more open mobile networks able to draw on the ever increasing wealth of web content, and more tools for personalization/social networking facilitating user generated content.

Verizon, for instance, had no new handsets to announce, but rather focused on the new video channels it was adding to its V Cast service, including new on demand access to shows like The Office, CSI, and The Hills. AT&T, meanwhile, announced a new “my communities” feature which allows users to access and manage all their social networking, such as Facebook and MySpace, through a single mobile access point. Add to this a variety of new tools and browsers for third party developers of all sizes to create content accessible across all mobile platforms, and you have a content explosion waiting to happen. You can see why this is just the beginning of the content revolution on the mobile device.

The quest for the right business models is still incomplete. Operators have experimented with pay video content services in the U.S., but uptake has been modest due to high prices and relatively little content up to this point. DTC estimates that there are only 6-7 million pay mobile video subs in the U.S. currently. The mobile video experience abroad suggests that free, ad supported models are the ones which can really drive penetration, but the volume of U.S. mobile video users has not yet been large enough to really stimulate advertiser interest in the medium here.

Source: Digital Tech Consulting

This could all change over the course of the next year, however, as this plethora of new content and tools is bound to drive consumer interest and video usage overall. The real challenge is monetizing it into a sustainable business.

Today DTC brings you the third and final part of the DTV Transition series:

Wilmington: The Transition Guinea Pig

Monday September 8, 2008 – Stewart Wolpin

If you want a clue as to how the digital transition could go next February, tune into Wilmington, NC this week.

Earlier this year, Wilmington's local TV stations volunteered to be the analog TV cutoff guinea pigs. On September 8, the analog turnoff becomes real and permanent in Wilmington.

Whatever the early transition brings in Wilmington, however, it will not be representative of what will happen in the rest of the country five months from now due to the fact that every area will bring its own unique conditions and challenges.

For one thing, only an estimated seven percent of Wilmington's population – around 10,000-15,000 homes – gets its TV signals exclusively over-the-air (OTA), although there is likely a good number of pay TV households that use an OTA TV set, as well. For another, Wilmington's local TV stations, the FCC and the NAB have all been running a publicity full-court press – shopping mall kiosks, and outreach through churches, local service clubs, senior citizen centers, and TV PSAs – to make sure every resident is prepared for the shut off.

Because Wilmington’s terrain is flat, the level of reception success residents may experience won’t necessarily be repeated in communities with hilly terrain. Hilly, mountainous and wooded areas will likely present more barriers for residents receiving all TV stations available in the area.

It’s been well documented that reception gaps will likely exist. Earlier this year the FCC initiated field tests to determine where these reception gaps may exist. The NBC affiliate in Wilmington, for instance, had to change its transmission site to a taller tower southwest of the city to ensure optimal digital coverage.

In an effort to further ease the shock of transition, the FCC has targeted 80 markets with more than 100,000 OTA households for the kind of saturated marketing effort used in Wilmington to discover and repair potential consumer knowledge and digital reception gaps before the February turnoff.

Whether or not the combined efforts of all concerned to make sure no one loses their TV signal on February 18 is successful is, of course, the $64,000 question.

Will DISH Network Drive a New Spike in AVC STB Shipments?

Tuesday, September 2, 2008 - Antonette Goroch

That H.264/AVC would be the next generation codec to MPEG-2 for commercial digital video applications has been evident for some time. The pace at which that transition would occur has been far less obvious, given MPEG-2’s widespread digital legacy. The recent announcement by Dish Network, the second largest DTH operator worldwide, that it would adopt H.264/AVC for all of its broadcasts—both SD and HD, not just HD as most other operators do—may have just sped up that timetable considerably.

Dish Network, along with DirecTV (the largest U.S. DTH operator), led the way in H.264/AVC deployment back in 2005, as the two were the first DTH operators to adopt the standard for HDTV deployment. Within two years DTH AVC set-top box (STB) shipments had reached nearly 5 million annually, and AVC is now the standard for DTH HD deployments worldwide. DTC’s most recent forecasts expect nearly 10 million shipments for the category in 2008. But, as DISH spreads the use of AVC throughout its subscriber base, hastening the end of its MPEG-2 legacy, AVC STB shipments could see even stronger growth overall -- particularly if this trend is picked up by other operators such as DirecTV or BSkyB.

The reasons for DISH’s strategic shift are likely two fold. Fundamentally, AVC is all about bandwidth—and bandwidth is at a premium now more than ever. Maxed out multichannel markets find operators adding channels (particularly HD channels) to sweeten their offerings. Indeed, DISH says it will offer some 150 HD channels in this new advanced package to be offered first in 21 markets. But DISH Networks’ subscriber growth is also slowing, and this new phase of service offers ample opportunity to beef up STB shipments (down this year) at the recently spun-off EchoStar Corporation (DISH’s STB arm) by converting its roughly 14 million subscribers to these new advanced models.

These competitive realities are not unique to DISH Network, and are shared by multichannel operators overall. That’s why its all the more likely DISH’s moves embody a fundamental tipping point in the transition to H.264/AVC, which leaves a non-MPEG-2 market not so very far off.

Last week DTC gave you some insight into why consumers who have heard the digital TV transition promises and purchased a digital converter box may be greatly disappointed once the hook up their new boxes. This week Stewart Wolpin delves into more problems being faced when the analog signals switch off.

Turn on, tune in, turn-off

Monday, August 25, 2008 – Stewart Wolpin

We are now six months from digital-TV-transition day. On February 17, 2009, when analog terrestrial television broadcasts cease, there will be millions of TVs that will go dark. There is an undercurrent of dread as industry and government players contemplate how big of an impact this will have on American households.

An analysis of the National Telecommunications and Information Administration (NTIA) coupon-redemption data and DTC’s estimates of ATSC digital-to-analog converter boxes shipped provides a glimpse of how many screens will go dark. And the news isn’t necessarily encouraging.

The NTIA recently announced that more than 23 million coupons had been requested as of mid August. Nice, but…

Nielsen, the TV ratings people, estimates there are 14 million over-the-air (OTA) households. This estimate doesn't take into account unconnected analog TVs in cable or satellite homes. Many unconnected homes have two or more analog TVs, and many connected homes have at least one unconnected analog TV. DTC estimates that there are about 38 million terrestrial analog TVs in use today.

Of those 23 million coupons, NTIA reports that 8.3 million have been redeemed to date. At that rate, the industry will be a long way from “converting” those 38 million analog TVs. Of course, there will be some analog TV sets replaced with integrated digital TVs, or analog sets used only with DVD players and videogame systems that won’t require a converter box. That will still likely leave millions of sets that aren’t ready for the transition.

NTIA Coupons

Yes, NTIA is sure to turn up the effort to educate people on how to prepare for the February 17 cut-off day. But the job won’t be easy.

First, a large number of people don't even know there is a DTV transition to begin with, if they even understood what it meant. A couple of months ago, Best Buy ran a survey on the subject. Forty percent of those queried don't know the date of the turn-off and 54% don't know why it's happening. Count me in that latter group.

A few days later, CNN.com ran a similar admittedly unscientific poll. Of nearly 110,000 responses, 70% said they knew the date, but 22% said they didn’t, and 8% answered "what's digital transition?" That's 22% and 8% of people who own a computer and read a Web-based news site. How much of a chance do non-technical people have to know what's going on – or, more accurately, what's going off?

For instance, last weekend while in the checkout line in a big discount department store, I watched a shopper in front of me unloaded a no-name 13-inch analog TV from his shopping cart. It was bad enough that the poor guy didn’t know his new TV would go blank in six months, but it was even worse that the store still sold it to him.

Here’s the kicker. The more than 14 million unredeemed coupons are or soon will be, useless. They have to be used within 90 days, and you can't reorder.

Digital-to-Analog Converter Boxes: A Little Expectation Management May be in Order

Monday August 18, 2008 – Myra Moore

Some consumer ads regarding the DTV transition imply that digital-to-analog converter boxes will deliver a dramatically-improved TV viewing experience over that of receiving over-the-air analog signals. Fair enough if all reception conditions are near perfect, but like most things, perfection is seldom achieved.

Granted, my analog over-the-air reception with a pair of rabbit ears is pretty poor, but that’s no surprise. But if I had bought into the implied promises communicated through some of the DTV transition ads, I would have been pretty disappointed in the converter box I hooked up to my analog TV a couple of weeks ago.

The message prominently highlighted in some of the spots is that digital equates to a better picture, better sound, and more channels. And it does, if you get strong, uninterrupted reception of all digital signals available in the area. But my analog TV, which is a secondary set stashed in the spare bedroom, and new converter box are hooked up to rabbit ears. Out of all the digital terrestrial channels available in the Dallas/Fort Worth area, only one came in clear and without frequent pixelation. The rest displayed more pixelation than clear picture or no signal at all. Some consumers will hook their converter boxes to an outdoor antenna and will likely get much better results than I did. But I’m betting that there will be plenty of people who will take the “easy” rabbit ear route that I did. Maybe they’ll get better results than I did, but it’s a crap shoot.

It wasn’t a big disappointment. My expectations were pretty low going in, but then I’ve followed the digital terrestrial TV business as a market analyst since its inception and knew about potential reception problems before hooking up the rabbit ears. But most people have no frame of reference or experience with digital terrestrial TV and don’t have any reason to take the messages of ”improved quality and more channels” at anything but face value.

It’s a foregone conclusion that some consumers will be frustrated and confused with the converter-box program. The temptation to paint the transition as a wholesale improvement over the existing system is hard to resist – it helps sell converter boxes and to convince over-the-air only households to prepare early.

Maybe introducing some expectation-management messages into the transition process is a good idea. The inclusion of an asterisk to the message that the magic of digital will result in receiving more channels and great pictures* may be in order.

*Magical results may vary according to antenna type and reception conditions

Will DivX Help Sony Take on Apple?

Monday, August 11, 2008 - Antonette Goroch

That no one has succeeded in challenging Apple’s dominance of the Internet video download market is both fact, and, to some prognosticators, prophecy. But DTC believes that Apple may face a credible challenger in Sony with the help of DivX.

Sony announced that it would allow its movie and television content to be distributed in the DivX format in January. Since then a steady stream of announcements from Sony and others suggest a broad, DivX-based ecosystem strategy, which could ultimately challenge Apple’s dominance for paid videos.

Indeed, over the past six months Sony has extended its original content agreement to include international releases, and made certification agreements across a range of product types, including the Playstation 3 and Blu-ray video optical disc. Add to this Sony’s new model of Blu-ray player, which also includes Internet access, and the picture becomes even more interesting.

Meanwhile, CinemaNow, one of the longest running Internet VOD sites with mainstream studio content, announced in late July that it will begin offering some (as yet unnamed) titles in the DivX format---undoubtedly Sony titles will follow by the end of the year. Certainly they will also be available through Sony’s own Sony Connect online properties to serve the Playstation platform.

Why might Sony succeed where others have failed? Because Apple’s digital entertainment ecosystem has seamlessly fostered growing mainstream commerce, but is still a closed network. Only Apple files will play in the Apple ecosystem. By aligning itself with DivX, Sony gains the benefit of a commercially secure platform (a la DivX’sOVS DRM) coupled with a thriving open platform that allows for a greater consumer base.

The potential of this sleeping giant is rather vast. DivX already boasts an installed base of over 100 million devices (predominately DVD players), which could easily double in short order if product suppliers other than those that make DVD players include DivX compatibility with mobile phones, and cameras. Indeed, DivX has spent the year announcing a swath of new DivX certified devices which include products for home networks (DivX Connected), mobile phones, Blu-ray players, as well as several promising chip level initiatives with Broadcom (set-top boxes) and AMD (mobile). Sony’s content will soon be available for purchase and playback by this entire “three-screen” installed base.

Additionally, there is already a great deal of DivX content on the Internet, meaning Sony won’t have to rely only on its own catalog to drive the platform overall. Stage6, DivX’s now defunct online clearinghouse, claimed some 17 million members before it was shutdown—and that was with no mainstream content. As a point of reference, DTC estimates Apple has about 16 million video customers.

If Sony can successfully tap the growing base of DivX devices, one thing is clear: the balance of power in the burgeoning Internet video market will have significantly shifted.

SAVE THE DIGITAL CAMERA!

Monday August 4, 2008 – Stewart Wolpin

Mobile phones are designed for communications. Digital cameras are designed for imaging. And yet, slowly but surely, the mobile phone seems to be replacing the digital camera as a primary, day to day picture-taking and video-recording device.

Camera phones outsell digital cameras around four-to-one. More than a billion camera/camcorder phones are likely to be sold worldwide in 2010. In comparison, DTC estimates that 119 million digital cameras will be sold this year. And folks holding up a mobile phone to snap a picture or capture candid video has become a common sight around the world.

DTC estimates that global digital camera sales will drop 5% in 2010 compared to 2009. By comparison, DTC expects global sales of mobile phones with digital imaging capabilities to rise significantly this year.

According to PMA, camera phones were present in 46% of U.S. households in 2007, up dramatically from 35% and 26% in the previous two years. In a recent survey, photo sharing site Flickr reported that nearly a quarter of shots uploaded to its site came from mobile phone cameras, and nearly 41 percent of users were uploading pictures taken by a mobile phone camera.

These trends are likely to continue. Mobile phone cameras have been vastly improving, moving from VGA to 1.3 megapixels (MP) to 2.0 MP. A growing number of phones now include 3.2 MP cameras, and a handful have 5 MP cameras. In the fall, Sony Ericsson will begin shipping the 8 MP Cyber-shot C905. Considering its imaging ergonomics, lens and advanced feature set, the C905 is more a digital camera with a built-in mobile phone than vice versa.

Mobile phones also add the convenience to send just-shot videos via messaging or email, or to upload them directly to video sharing sites such as YouTube, a feature only one or two digital cameras can match.

Is the standalone digital camera doomed?

Source: Digital Tech Consulting

AVC/H.264 to the rescue?

One way digital camera makers can battle this erosion is to offer higher-resolution video recording. Yet, DTC estimates only about 19% of current digital camera models include MPEG-4 Visual video recording capabilities, and at this writing only Casio offers models with AVC/H.264 HD video recording.

What's even more surprising, prominent digital camera makers Canon, Polaroid, HP, Panasonic and Pentax sell NO digital cameras with MPEG-4 Visual video recording. Instead, all offer Motion JPEG, which allows users to extract still frames.

Canon and Panasonic make and sell AVCHD camcorders, so are quite capable of adding HD video capture to its digital cameras. But the two companies are likely fearful of camcorder cannibalization if they added AVC/H.264 video recording to their digital cameras.

These no-AVC decisions run counter to consumer desires. According to a 2008 J.D. Power Digital Camera Usage and Satisfaction Study, 40%of users used their digital camera to record video, but 52% wanted the capability. Sixteen percent cited high-definition video recording as one of the five most important features that would influence their digital camera selection.

With this increased competition from sub-$100 flash camcorder mobile phones with video capture, digital camera makers have gotten the message. In September, two top 10 digital camera makers will add models with AVC/H.264 video capture.

DTC expects more digital camera manufacturers will add AVC/H.264 video capture as well as some kind of uploading abilities.

If not, standalone digital cameras could soon become as much of a technical dinosaur as the vinyl record turntable, audio cassette player and the VCR.