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Will Disney Find Digital Distribution Revenues in its Keychest?

Monday October 26, 2009 – Antonette Goroch

Disney took the wraps off its Keychest initiative for online digital distribution last week, as the company seeks to temper the effects of the growing slump in DVD sales (down as much as 25% at some studios).  While this particular initiative seems unlikely to achieve that outcome, the shift in thinking from device based content security to device independent content security is pretty radical from such a major media player, and bodes well for the future of digital distribution.

Disney’s technology, which it plans to formally unveil next month, enables a consumer to buy permanent access to a title so that it can be played back across multiple devices, such as TVs, PCs or mobile devices, with the content housed in central databases rather than a consumer’s hard drive.  A user is issued a “key” which checks in with a central database of ownership rights.  With the system, Disney hopes to address one of the biggest issues facing widespread online digital distribution which is the ability to playback content securely in multiple digital contexts.

The challenges facing broad adoption of the initiative will be many.  At a very basic level, because of the nature of any connected device strategy, adoption has to occur among a huge range of companies and industries.  It seems unlikely that enough of a broad base of adoption can occur among so many competing players with different interests—many of whom will likely be wary of Disney having such a large degree of control over what would be vast databases of content usage information.

Still, the shift in thinking on Disney’s part is significant, and may ultimately be a key factor in reclaiming those falling DVD revenues.  For too long major studios have tried to lock down content to specific devices and platforms to keep them secure, limiting their utility in an increasingly connected media environment.  If consumers can’t easily play their content on multiple devices, they may balk at buying in the first place.  Successful digital delivery, and its monetization for the Hollywood aftermarket, must be predicated on usage rights being attached to content not devices.  Disney’s shift is a positive step toward building coalitions among companies with varying agendas.  But they all have one shared agenda – sell as much content as they can. That’s kind of hard to do if it’s all locked down.

Death Death Knell for FireWire in STBs?

Monday October 19, 2009 – Antonette Goroch

Back when the conventional wisdom was that lots of HDTVs would include speedy FireWire connections the consumer electronics and cable industries hammered out an agreement (that the FCC formalized) that all digital HD cable STBs for distribution in U.S. must have a FireWire connector.

Since FireWire, for a variety of reasons, lost the TV popularity contest to HDMI, the cable industry wants to permanently kick it out of its clubhouse.  In what will certainly be only the first of several similar filings, Intel petitioned the FCC last week for a waiver of the 1394 (FireWire) requirement in its planned HD cable STB chip design.  The FireWire rule was writ in 2005 and FireWire has failed to gain traction as a usable interface for transfer of signals from STB to TV or for in-home networking.  HANA (HD Audio Video Network Association), the most significant home networking initiative to utilize FireWire, disbanded late last year, leaving the interface all but dead in the cable context.  Shipments of 1394 cable STBs have held steady in the U.S., but in other parts of the world where cable players don’t have to make nice with the interface, FireWire for TVs pretty much evaporated by 2008.

With this backdrop, it’s no surprise that vendors and operators alike will begin to take action to eliminate the FireWire requirement in the U.S. in coming months.  Its inclusion costs the manufacturer about $5 per unit, which Intel says in its filing makes a system-on-a-chip design cost prohibitive—especially for a little used interface.  Texas Instruments has countered that this is a small percentage of the overall STB costs, but operators, eager to cut costs in any way possible, aren’t likely to agree. The FCC, meanwhile, has shown great willingness to offer similar waivers in recent months, such as the waivers regarding separable security granted over the summer.  Should the waiver be granted, it’s likely FireWire will be out of cable STBs entirely by 2009.

AVC/H.264: Keeping Camcorders Alive

Monday October 12, 2009 – Shelby Cunningham

We’ve come a long way.  I remember waiting for my parents to set up the Betamax camcorder on Christmas morning.  We had to wait for hours as batteries recharged and lights were set up.  And in the 80s no one could even imagine uploading their video onto a computer to share with the world.  Today’s camcorders are small, quick, easy to use and high-def.  And the video software is so simple a child can use it.  Leading the charge for camcorders and desktop software are products that use the AVC/H.264 video compression standard.  AVC offers greater efficiency than many other compression technologies and can deliver the high-def pictures consumers desire.

People can now take captured video, upload it, edit it, and send it out or post it on YouTube in no time at all.  The consumer camcorder market is still on a path to converge with the digital still camera market, but AVC/H.264 camcorders are taking over and will keep the traditional camcorder market alive, and eventually take over almost entirely. 

Both camcorders and AVC/H.264 capable desktop software will be experiencing growth over the next few years.  To date, DTC estimates that about 55% of aftermarket desktop software is AVC/H.264 capable, and will take up almost the entire desktop software category within a few years.  At the moment AVC/H.264 camcorders only take up on estimated 29% of the entire camcorder market, but the market share is quickly rising as DTC estimates that they will take up 65% of the market in 2011, and keep going up from there. 

So even though the camcorder and desktop software markets as a whole may be dropping, AVC/H.264 camcorder and desktop software shipments are rising up to take over their categories, and the video capturing and editing communities as well.

Source: Digital Tech Consulting

Smartphones: Helping Mobile TV?

Monday October 5, 2009 – Shelby Cunningham

Smartphones are responsible for giving consumers one of their video fixes these days.  They’re not just for early adaptors or businesses anymore, but are now being toted around by teenagers, poor twenty-somethings and every other segment of the population.  And now that smartphone shipments are seeing some growth, what new innovations will they bring to the table?

It wasn’t until the era of the iPhone, Android and Pre that handsets handled video the way people actually wanted to watch it on the small screen.  This generation of smartphones brings a form factor that is very video application friendly.  AVC video compression in handsets is very mainstream now.  In 2009 about 105 million AVC handsets shipped worldwide, and that will increase to 173 million in 2010. 

Source: Digital Tech Consulting

As more and more consumers pick up these higher end smartphones, this will allow for further innovation and video services.  Third parties have already embraced the platform, and the success they are seeing is encouraging for content owners and services.  The mobile TV platform is poised to see growth in the near future as well, with the hopeful take-up of mobile TV and other streamed content.  So pull out your smartphone and watch some video, because that’s where most of the innovation is, not on your television set.

Digital TV Anarchy: Why the Internet Will Make Us Crave Simplicity

Monday September 28, 2009 – Myra Moore

The future of TV, with the promise of unfettered access to any and all programming through increasingly sophisticated TV receivers, has a kind of utopian ring to it (if utopian and TV can be used in the same sentence) .  Fewer and fewer gatekeepers, a lineup of programming choices that will make current multichannel offerings look stingy, cheap production and distribution for aspiring  film/TV producers,  and greater access to programming unencumbered by security measures. 

Sounds downright idyllic, doesn’t it?  Maybe my glass is half empty, but it seems more anarchic to me. Untested business models, unfiltered programming choices, uncertainty (or disregard) of copy rights, and a lack of order or organization. At the very least, it’s going to be messy.

All the big TV suppliers have trotted out “connected” TVs and the limited Web access they provide suggests a step toward organization, but the limited access really has more to do with the partners they’re working with than a desire to provide consumers with a seamless and rich experience. Access to Netflix and Amazon online services, Yahoo widgets, and select photo-sharing sites, for example, doesn’t exactly harness the power and promise of delivering programming and other data over IP.  It seems that there should be a middle ground somewhere between this narrow access and the senseless TV Web browsing that was kicked to the curb in the early 1990s. Remember Web TV?

After spending some time at the IFA electronics fair and the IBC trade show earlier this month, it is clear that middleware suppliers, conditional access companies, and software developers working within interactive TV standards see their futures in developing more sophisticated programming guides, search engine wizardry, and remote control platforms for these connected TVs. Companies like Rovi (formerly Macrovision), Open TV, Nagravision, and Alticast showed off their latest wares designed to tame the Internet TV beast without locking it in a cage.

It’s too early to say which of these efforts will do the most to harness and simplify video, data and graphic programming delivered over the Internet to the TV, but one thing is pretty certain.  There are some who will welcome unrestricted and unfiltered access to Internet video programming viewed on the TV, but most of us just want to watch TV. So please make it easy.

Will Internet and Mobile Video Usage Growth Stunt TV Viewing?

Monday September 21, 2009 – Antonette Goroch

Consumers of new media are apparently the old dogs who are learning new tricks.  Now that mainstream content providers are starting to loosen their death grips on their content, new viewer habits are emerging.  The folks who distribute that content via old pipelines are hopefully paying close attention because viewers are changing the rules of what it means to watch TV.  

Audience measurement research from Nielson revealed audience size growth of 47% for Internet video content and 70% for mobile video content from 2008 to 2009.

That this will affect television viewing is unavoidable--the question is how.

By all accounts mobile and Internet viewing are broadening the broadcast audience overall, not cannibalizing TV viewing.  Indeed, Nielsen reports that TV viewing also grew by 2h 2 min per month.  This also comes as no surprise, since media technology advances typically add to, rather than take away from the audience (such as the case of the VCR and packaged video media).

What’s changing is how people are watching.  One of the most significant bits of data in Nielsen’s reporting is that an average of 28% of home Internet usage is simultaneous with TV viewing.  The impact of this behavior on advertising revenues is unclear.  If viewers are on the Internet and watching TV simultaneously, they are undoubtedly focused more on surfing during the TV ad spots.  Are viewers absorbing both inputs?  Does the distraction of the Internet mean that viewers watching a program from a PVR aren’t bothering to fast forward through the ads?

What is clear is that broadcasters (of all platforms) and content providers must retool old business models to conform to this new reality.  Business models need to reflect this changing dynamic in viewing audiences.  Taking these changes into consideration will be the key to taking advantage of growing consumption, rather than being rendered obsolete in a changing landscape.

PCs Pushed Aside (For Now)

Monday September 14, 2009 – Shelby Cunningham

Advanced Video Optical Disc PC sales have suffered during the recession.  Instead of opting for the traditional PC with an internal Blu-ray Disc (BD) drive, consumers are favoring netbooks.  Netbooks ship sans internal optical disc drive, allowing for a smaller form and lower price tag.  Perfect for the current economic storm we are weathering. 

But don’t fret if you are a fan of the traditional PC experience, DTC expects shipments of BD PCs to gain traction starting in 2010.  DTC estimates about 4 million units to ship by the end of 2009 with a 226% year-over-year growth rate expected between 2009 and 2010 translating to over 13 million units shipping in 2010.   DTC expects triple digit year-over-year growth between 2010 and 2011 as well with nearly 52 million units expected to ship in the latter. 

Source: Digital Tech Consulting

While netbooks are certainly noteworthy machines that have done much to keep the PC business afloat during the rough economy, they do come with drawbacks that leave some consumers wanting more.   For that demographic of consumers upgrading to a traditional PC is just around the corner and the change from just being able to do simple internet and word processing functions will feel quite nice. 

DTAs: Friend or Foe to Advanced Cable Services?

Tuesday September 8, 2009 – Antonette Goroch

There’s been a lot of controversy in recent months over DtA STBs, but is it really much ado about nothing?

Cable operators, led by Comcast, are looking to DtAs (Digital-to-Analog adaptors) as a low cost way to transition networks to all digital, thereby reusing spectrum currently allocated to bandwidth hogging analog channels for more standard and HD digital channels. A key element of this cost savings is the lack of separable security in DtAs, eliminating costly CableCards and pushing prices below $50 per unit.

Of course, this is in direct contradiction to the 2007 FCC mandate requiring separable security in all digital STBs. Comcast has so far skirted this requirement by including no security at all---although reportedly an integrated security can be implemented by a software upgrade should Comcast decide to do so. Several vendors, however, sensing the enormous opportunity at hand, have applied to the FCC for temporary waivers from this requirement, saying DtAs are a transitional technology that will not impact the larger FCC goal of stimulating competition and a retail market for STBs. Such waivers would eliminate the need of operators to obtain waivers of their own, since the actual STBs would already be covered under the vendor waivers. Evolution Broadband, a supplier to several small rural operators, was the first to obtain a waiver in June, with the major players such as Motorola, Cisco and Pace soon following suit with their own applications.

The CEA, joined by several public interest groups, is crying foul, opposing these applications on the grounds that they will inhibit the adoption of both retail STB sales (since operators will favor the low cost DtAs over more expensive models), as well as tru2way products.

There are merits to both arguments. Should the FCC grant these waivers, the CEA argues that cable operators will favor these over more expensive models for quick digital upgrades argues. Indeed, DTC estimates more than 5 million DtAs shipped during 2008—almost a third of all U.S. shipments—and this will jump past 10 million in 2009. 

But will this really inhibit the move to retail and advanced STBs?

In the short term, perhaps it will. In the long term, however, that’s not at all clear. DTC estimates that the market for DtA’s will be short-lived, perhaps three to five years, because they are a transitional technology.  Now that the analog broadcast shift has occurred, new TVs will be all digital and won’t require a DtA to work with all digital networks. All digital networks, meanwhile will make it easier for cable operators to implement advanced services—which is in their interest to do. Advanced services, which will require both separable security and tru2way, are both more profitable and more competitive for ops. DtAs won’t likely inhibit cable ops from pushing these advanced services.. Rather, all digital networks will make it far easier for cable ops to offer them. And this will be a rising tide for all boats.

3D: Do We Really Have to Have Another Serving? 

Monday August 31, 2009 – Stewart Wolpin

Imagine you've just completed the Thanksgiving feast – turkey, dressing, mashed potatoes, pumpkin pie: The works. Your body sinks into the sofa as the tryptophan and alcohol sends you gently in-and-out of consciousness. Just as you enter REM sleep, you're blasted awake by a loud shriek: "Time for dinner!"

Dinner?! You just stuffed yourself!

Like the after-effects of a big holiday feast, America is sleeping off the long digital TV transition. Instead of turkey, we've consumed a bellyful of dire government entreaties to make sure we have a tasty new HDTV, a side dish of digital cable box and a digital converter desert. After this HD smorgasbord, we are now happily dazed in our digital torpor.

Wake up! Panasonic (and presumably the rest of the HDTV/Blu-ray equipment and content selling contingency) want us to do it all over again, this time to transition from 2D HDTV to 3D.

Last week Panasonic held a number of small demonstrations of its 3D HDTV and 3D Blu-ray products. Its stated plan is to start shipping 3D HDTV and 3D Blu-ray products in 2010.

What is Panasonic's 3D system? More on the technology here.

Why the rush?

Under a cloud of increasingly lower margins for flat-panel TVs and Blu-ray Disc devices, and the slower-than-hoped-for uptake of Blu-ray devices, TV suppliers understandably see 3D HDTV as a tasty high-margin morsel next to the $99.99 Blu-ray Disc player. Consumers have only been snacking on low-cost smaller-screen LCD TVs during this nasty recession and now suppliers are busy in the kitchen whipping up the next high-margin TV technology.

A 3D home theater will require not only new 3D HDTVs and 3D Blu-ray players but also AV receivers, all equipped with the just announced HDMI 1.4 standard. Oh, and for this flavor of 3D TV, you’ll have to wear those stylish glasses.

3D HDTV is the perfect antacid to the current HDTV/Blu-ray market heartburns. Unlike Blu-ray with its hard-to-see qualitative improvements and hard to suss BD Live connectivity frills, 3D creates an immediate and compelling gulf between what was and what will be. For Joe Sixpack, the arguments for spending extra dough to improve from 480p and 1080p might as well be a discussion between Albert Einstein and Neils Bohr about the merits of quantum mechanics.

The differences between flat TV/DVD and 3D HDTV/Blu-ray? (Insert your own humorous night-day metaphor here.)

The problem is America is still bloated from the digital transition meal. Now that millions have spent millions on new HD gear, how will they feel about being told they now have to spend again/more on new gear to get the real advantages of HDTV?

We suspect that most of us are going to push back from the table and say “We’re pretty full right now.”

Stay tuned.

Checking in with STB Shipments

Tuesday August 25, 2009 – Shelby Cunningham

Networked connected set-top boxes (STBs) reached record shipment numbers in 2009, coming in stronger than expected.  Digital cable STBs, Direct-to-Home (DTH) STBS and Internet Protocol TV (IPTV) STBs all totaled over 133 million units shipped in 2008, and are expected to ship over 150 million units in 2013. 

Digital cable STBs saw an increase in shipments in 2008 due mainly to new Chinese rollouts, as well as the introduction of Digital-to-Analog (DtA) adapters in the U.S.  The Beijing Olympics provided the opportunity for digital cable upgrades to happen quickly in China.   

In the DTH Satellite STB market, shipments were fueled by a demand for high definition and other advanced systems in Europe.  Also in Europe, IPTV shipments are maturing and therefore slowing.  IPTV shipments did come in higher in North America, and weaker in Asia Pacific, but overall were largely in line with previous forecast.   

Source: Digital Tech Consulting

Source: Digital Tech Consulting

45 Million Boxes in 18 Months: Who Knew?

Monday August 17, 2009 – Myra Moore

Who knew so many consumers would buy U.S. DtA converter boxes?  That 45 million (DTC’s latest estimate from its tracking service) shipped into retail from January, 2008 through June, 2009 comes as a surprise to just about everyone.

We’ll even go higher.  DTC estimates that given the large volume of coupon requests in June and July (on the heels of the deadline for requesting coupons) that number could hit 50 million by the end of the year.

So now that the U.S. successfully shut off the analog spectrum without a major disaster, what are lessons learned and why should anyone care now that it’s all over?  First of all, folks in the business of making equipment and delivering over-the-air TV programs should care because there are lots of other countries that have yet to shut off analog transmissions.  Translation: There’s still more money to be made on turning off terrestrial analog transmissions.

Lessons learned?

·         A product category ripe for the old-style price wars can actually keep its average retail price steady for a sustained period.  Granted, there wasn’t a lot of margin for suppliers and retailers to begin with, but it seemed like a dive to the bottom could have started a lot earlier.  We’ve only witnessed serious discounting off the average $50-$65 retail price since the shut off occurred.  Frankly, we expected to see lots of $40 price tags for converter boxes quite early in the program.

·         Don’t underestimate the popularity of a government subsidy.  Most prognosticators seriously underestimated the take rate of coupons within pay TV households.  Those old analog sets in the basement or the garage?  Good chance they’ve got the box.

·         Procrastinators rule.  There will be an onslaught at the very end.  No matter how early you warn folks about the big day and how many times you tell them (ad nauseam), most are gonna wait.

Can Blockbuster Break Through the Bricks & Mortar?

Monday August 10, 2009 – Antonette Goroch

No doubt in response to Netflix’s popular video-on-demand set-top box (the Netflix player by Roku), Blockbuster debuted its Internet VOD service/STB to much fanfare late last year.  But after almost a year of luke-warm reviews Blockbuster has been conspicuously silent about shipments of its branded set-top boxes or customer usage, leading many to question the long-term viability of the effort.

Blockbuster would seem to be well positioned to leverage its national presence into a successful VOD brand.  It has a strong existing customer base, which it has extended fairly successfully into DVD by mail (a la Netflix) over the past couple of years.  It also has existing deals with major studios that theoretically could be leveraged into shorter release windows and expanded catalogs of back titles.  Never mind the failed VOD experiment with the infamous Enron back in 2001 – we’ll give Blockbuster a pass on that one seeing that its business partner couldn’t be relied upon to be honest with – well – anyone.

But despite this, unofficial estimates put STB shipment levels in the tens of thousands at best, far below what many had been expecting from the product.  A couple of factors could suggest why reception hasn’t been what many were hoping for.  While competitors such as Netflix, VUDU and Amazon have been extending their catalogs into HD throughout the year, Blockbuster remains SD only.  Further, while Blockbuster has been able to secure some new releases ahead of competitors, its overall library is smaller---particularly in regards to popular TV content. Additionally, Blockbuster only allows a 24 hour viewing time from purchase—shorter than a bricks and mortar store rental.  The bottom line is that Blockbuster has had little to differentiate its service in a recently crowded slate of VOD to the set-top competitors, and the market for such a single-use set-top box is inherently small.

Indeed, now that Netflix has essentially picked the low hanging fruit of early adopters with its Roku Netflix Player, differentiation will be increasingly difficult for most of these products.  That’s no doubt why most players, both hardware and content alike, are seeking to expand their presence and capabilities through cross partnerships.  Roku, for instance, just announced its newest player includes support for a variety of video codecs, access to the Amazon and Netflix VOD libraries.  Similarly, Blockbuster is reported to be close to a deal with Sony to offer its content library via the PlayStation 3, as well as its own player.  What seems clear is that with such a crowded market place for essentially the same content, Blockbuster (and other potential VOD service providers) can no longer rely on just a strong existing brand to make headway into the burgeoning market for Internet VOD.  Indeed, Blockbuster’s experience indicates it will have to raise the bar considerably---both in terms of HD content, scope of delivery and the depth of their libraries—to gain any significant marketshare at this point.

LTE, Mobile DTV: A Change is Gonna Come
Monday August 3, 2009 – Stewart Wolpin

U.S. terrestrial broadcasters are buzzing about finally being able to monetize their forced investment in DTV with the advent of mobile DTV sometime later this year or early next year. Simultaneously, Verizon and, to a lesser extent, AT&T, are both buzzing about the future of their 4G LTE networks, due early next year and 2011, respectively.

These buzzes are not separate and distinct. Broadcasters and wireless carriers have been inexorably bound for nearly 50 years in their battles over precious spectrum – the recently concluded digital transition, the logical conclusion of these battles, has made both Mobile DTV and LTE possible.

This symbiosis between broadcasters and carriers will not change as both buzz about their new standards. Together and separately, in ways no one – including their prime promoters – can predict, mobile DTV and LTE will revolutionize how broadcasters and carriers deliver content and services, the how studios package content, the types of mobile equipment that will be manufactured to receive and view this content, and how consumers will consume all of these.

Verizon has been conducting LTE field tests in several markets and, according to published reports, have been achieving download speeds of up to 60 Mbps, faster even than its wired FiOS internet service. Real world speeds are likely to be less, but even if actual throughput is half of those reported, 30 Mbps is still nearly twice as fast as most wired broadband delivery methods. The mind reels with the possible positive effects on both mobile and home Web access and the negative effect on wired ISPs.

The official word from Verizon about LTE is a 20-30 city rollout in the second half of next year with full nationwide rollout planned for late 2013/early 2014. But parallel rumors have been flying about an Apple tablet due early next year and of Verizon rushing LTE rollout, prompting speculation of an LTE-powered Apple tablet and a future LTE iPhone later next year.

Exaggerations and speculations? Absolutely. But it's hard to deny the logic that such converged devices will flood the market.

At the last two CESs, for instance, both LG and Samsung demonstrated a variety of mobile DTV devices such as portable DVD players, portable TVs and mobile phones. Verizon and AT&T both have gotten into the carrier-subsidized netbook business, perhaps building a foundation for a range of LTE devices. Whether or not broadcasters and telecom carriers will take the symbiosis far enough to merge the two technologies into a single device is still not known.  We think that it’s a possibility but not until all parties invlolved can figure out how to either make more money off the services, or to retain valuable high ARPU customers.

Source: Digital Tech Consulting 

The Next Video Marriage: Broadcasters and Mobile Service Providers
Monday June 1, 2009 – Antonette Goroch

Subscriptions for mobile TV services (data or content plans including video/TV services) are on the rise with 3G services delivering most of the subscribers. DTC estimates that mobile TV subscriptions grew 37% in 2008, reaching just shy of 100 million worldwide.

Source: Digital Tech Consulting