The Connected TV World Summit takes place in London next Tuesday, 18^th May. Key speakers includes Griff Parry from Sky, Harris Morris, the CEO of Harris, Ian Mecklenburgh of Virgin Media, and Neale Dennett, Head of VOD, ITV plc.   My colleague, Peter King, will be giving the keynote analyst presentation. He will present our own independent analysis of the connected TV opportunity. He will also be giving the audience insights into the changing behaviours exhibited by early adapters of connected TV products and services. This research will be drawn from our Digital Home Observatory, which uses ethnographic techniques to explore emerging attitudes and behaviours in the digital home environment. 

You can attend the conference in person, or watch the event on line and free of charge. Registration details are here: http://connectedtvsummit.com/register.html.

David Mercer Client Reading: Global Audiovisual Market Forecast  �

Global advertising revenues are forecast to decline by 8.5% this year, according to Strategy Analytics’ latest Global Advertising Forecast. In such a tough environment the need to find new communications platforms and ad-based business models is more urgent than ever. In theory the arrival of so many new IPTV services, in both managed and over-the-top environments, should give cause for optimism. If IP technologies have any advantage over traditional alternatives it is that they enable closer, more measurable relationships between those with the message (advertisers) and those receiving it (viewers). So far, however, with a few exceptions, we have seen little commercial evidence of these capabilities in the real world. These are some of the issues we will be exploring at the forthcoming “Future TV Advertising Forum” in London on December 11th. I will be chairing a session on Advertising in the Age of Convergence, with speakers from Coca-Cola, Thinkbox, RomTelecom and the Co-Operative Group. Other keynote speakers at the event include Turner Broadcasting, Sky, Channel 4, ITV, Discovery, Telenet and Ford. It promises to be a compelling and thought-provoking event. Early bird conference passes are available until the 25th November or register to watch the event live online FREE of charge at www.futuretvads.com. Twitter: twitter.com/DavidMercer_SA Client Reading: Online Video: YouTube vs. Hulu - Let the Battle Commence!

One of the biggest ever live Internet sports events passed off (for this viewer at least) without major technial hitches this evening as the World Cup qualifier between Ukraine and England was streamed live to hundreds of thousands of viewers in the UK. Each paid upwards of £4.99 to watch the game, which was not available through any other broadcast platform. For the record, Ukraine beat England 1-0 to keep alive their hopes of joining England at the World Cup Finals next year in South Africa. My own live internet TV experience was based on a ~3Mbps BT connnection, a WiFi link to the BT Homehub, using a HPElitebook 6930p laptop with an Intel Core2 Duo 2.4GHz processor and 2GB of RAM. After resolving an initial freezing problem by disabling hardware acceleration in the Flash player I was able to watch the entire broadcast in the high quality mode with no freezing or picture breaks. I would describe video quality as close to a poor quality standard definition live football broadcast on Sky, something which major UK broadcaster ITV is well known for. One way I gauge quality is to judge how easy it is to see the numbers on the back of the players’ shirts from a distant, half-pitch shot. In live Sky SD broadcasts this is relatively easy; in live broadcast ITV games it is almost impossible, and Perform’s internet broadcast was close to this level. But the overall experience was acceptable on a 15” PC screen. I imagine it would be less so for those who connected to a large screen TV. We will know more about the commercial success of the venture once Perform and Kantaro announce subscriber numbers, which they have promised to do. They have confirmed technically that live internet sports can be delivered to mass market audiences. But with each viewer paying a minimum of £4.99, the experience had to come as close to pay TV quality as possible. Even though our experience was good, we will watch with interest for any other reports of dissatisfaction from paying customers. While internet broadcast technology is becoming more reliable, it is still by no means clear that pay-per-view sports is a viable business model, on any platform. NTL famously failed to make a business from pay-per-view football in the UK, although many believe they vastly overpaid for rights in the first place. The internet may be proven technically as a delivery platform, but the questions around willingness to pay, appropriate price points, and the profitability of this platform remain very much unanswered. Twitter: twitter.com/DavidMercer_SA Client Reading: Online Video: YouTube vs. Hulu - Let the Battle Commence!

Lots of excitement in the press over the weekend about the availability of Canvas set-top boxes in the UK by Christmas 2010. For non-UK readers, Canvas is the BBC’s initiative to bring television over the internet to big screens, ie TV sets. The BBC Trust’s consultation on Canvas is here. The Christmas 2010 “announcement” was made by Richard Halton, the BBC’s IPTV project director. BT, ITV and (channel) Five are also partners in the project. Halton was quoted as saying that set-top boxes built to Canvas specifications would be available to UK homes by Christmas 2010. We should be careful not to read too much into any such precise prediction of events more than 12 months in advance, especially when they are made by an organisation that has little control over when they will happen. The BBC is of course the driving force behind Canvas, but as well as having to overcome the BBC Trust’s objections to the project, it also has to win the technical and marketing support of device manufacturers. The latter have been extremely frustrated at the Canvas delays and several have found other ways to get iPlayer onto TVs. As we have often said the games console is likely to be a key platform for online TV. iPlayer has been available on both the Wii and the PS3 for a year or so but only with limited capabilities and effectiveness. The BBC has now upgraded its PS3 iPlayer application and since its launch it has already become the second most popular way to watch iPlayer after Virgin Media's VOD service. According to Anthony Rose, the BBC’s Controller, Online Media Group and Vision, PS3 was catapulted to 10% of all iPlayer viewing in the week following the update. Early reports confirm that PS3 owners using a 1.5Mbps iPlayer stream are now seeing close to SDTV quality on large screen TVs. Since the PS3's price drop to £250 (€299 in rest of Europe) it is one of the cheapest and easiest ways of watching online TV from the BBC on the TV. Even though they will offer additional channels the possible arrival of Canvas set-top boxes late next year is unlikely to dent enthusiasm for the many alternatives which are sure to emerge in the meantime. Twitter: twitter.com/DavidMercer_SA Client Reading: Digital Media Devices Global Market Report

So far we have not been disappointed at the IEA/Marketforce's Future of Broadcasting conference, even though the precise questions I suggested have not been addressed. We did, as expected, have to suffer the well-worn cliché, courtesy of Channel Four’s Anne Bulford, that the UK has the “best broadcasting” in the world. If somebody could offer a quantitative measure to prove this I might start to believe it. The battlelines have, as usual, been drawn between Sky on the one hand, and everyone else on the other, although Michael Grade, Chairman of ITV, in which Sky is a major shareholder, did a good job of supporting Sky’s view that there is too much regulation in broadcasting in general. As Grade said, “it’s not as though broadcasting is a life-threatening industry, like air travel or drugs”. Grade described the process involved in getting business deals done as a “nightmare involving years of lobbying”, because of the grip Parliament has on the broadcasting industry. Sky, in the form of COO Mike Darcey, has done its usual excellent job of standing up to the forces lined up against it (as it sees it). The key question, from Ofcom’s Peter Philips in the audience, was “why should Sky not be regulated like the telecoms industry?”. Darcey’s response: “because, unlike Sky, BT did not build its own network – the government did”. In that response lies the nub of the regulatory and competition issue in the UK and in many other markets around the world. Should content be split from the network? Ofcom has indicated clearly that it does not see this as an appropriate solution, instead preferring to concentrate on the issue of the rates at which Sky wholesales its channels to other service providers. Darcey today indicated clearly that it would take Ofcom to court if it went ahead with proposals to price-regulate Sky’s wholesale business. At the same time, Sky recommends that competitors, such as ITV and Channels 4 and 5, consider becoming pay TV providers as advertising revenues plummet. But competitors have already failed at this in the UK: first, Channel Four’s abandoned its premium movie service; and now Setanta has had to withdraw its pay sports channels. With a few minor exceptions (including adult content) there are no successful pay TV competitors to Sky in the UK. Sky’s success has been built on its control of network, technology platform and content. Unless another firm is prepared to make a similar investment, or content is forcibly split from the network, it is unlikely that a serious alternative will emerge. Twitter: twitter.com/DavidMercer_SA Client Reading: Digital Media Devices Global Market Report

I’ll be heading to London’s Le Meridien hotel in Piccadilly next week to hear some of the UK’s top media decision makers debate the future of broadcasting; hence the event’s name: the Future of Broadcasting conference, courtesy of the IEA (Institute of Economic Affairs) and MarketForce . The first morning’s panel alone should be worth the admission fee. There can’t be many occasions when top execs at the BBC (Caroline Thomson), ITV (Michael Grade), Five (Dawn Airey) and BSkyB (Mike Darcey) have gathered together around the same table. Indeed, there might be a few hints at anti-trust activity if they did it too often, given that they represent more or less the entire UK television industry, with the primary and unfortunate exception of Channel Four – they will be appearing separately in the following session, but I don’t suppose we should read too much into that. I just hope the panel’s chairman manages to get these senior figures to avoid the usual platitudes about the strength of the UK broadcast industry, British TV being the best in the world and the impact of the Digital Britain report, and address the awkward issues, such as: - Why does the BBC need so much money from licence fee payers? - Is Sky’s domination of the UK pay TV market a good thing for British broadcasting? - Can ITV survive without being acquired by a major overseas media firm? Given that there are only 20 minutes for discussion this seems unlikely, but we live in hope. In any case, it looks like a fascinating couple of days and I’ll be reporting back whether or not the key questions are answered. Twitter: twitter.com/DavidMercer_SA Client Reading: Global Digital Media Growth Slows to 2.7% in Q4 2008

The terrible financial results reported today by ITV, the UK’s largest commercial broadcaster, illustrate the collapse in traditional television advertising business models as the recession’s bite deepens. The £2.7bn loss (on turnover of £2.02bn) results largely from reduced expectations for future advertising revenue. Television advertising revenues are currently in freefall, declining in the current quarter at a rate of 17% compared to a year ago, and that’s why the company is having to make 600 people redundant and suspend production of some of its most popular shows. As Michael Grade notes, UK market conditions are “unprecedented” in the past 30 years, and probably since the launch of commercial TV in the 1950s. Like many firms, ITV is now reluctant to forecast the outlook for its core revenue stream. It had previously assumed annual advertising growth rates of 1.5-2.0%. This assumption has clearly been blown out of the water. The recession is clearly a large part of the blame, but ITV has also made a number of strategic errors over the years, and those chickens are now coming home to roost. Buying Friends Reunited was always a strange move, and even though the business is profitable it has been non-strategic to the company’s core video and television business. It is now pushing ITV.com as a video portal and has launched ITVplayer in response to the phenomenal success of the BBC's iPlayer. ITV was also late to the party in multichannel television, having previously been caught up in the ONdigital/ITVdigital debacle nearly ten years ago. Its “family” channels (ie sub brands of ITV) are doing well, but they are competing in a world of several hundred TV channels and ITV had already missed the opportunity to establish a leading multichannel position. While traditional television advertising in free-to-air television will eventually recover, there must be real uncertainty as to whether it will ever reach the peaks seen in recent years as viewers move increasingly to on-demand services. For this reason, ITV’s online video distribution strategy is now key to its future. ITV.com now has 6.5 million monthly unique visitors, and this peaked at 9.4 million in November last year, making it the UK’s fifth most popular website. In total ITV.com delivered 86 million “video views” during 2008. ITV’s challenge is to continue to grow this activity and to turn its losses into profits: no easy task, but in the current environment this is about all the company has to hang on to. Twitter: twitter.com/dmercer15 Client Reading: Western Europe Digital Television Forecast: 1H'09

LG kicked us off this morning with a bullish presentation after announcing 16% US revenue growth in 2008. A variety of new technologies were confirmed, including 60GHz WirelessHD connectivity, 3D processing chips that will be ready for future 3D formats, TruMotion 240Hz (which combines 120Hz with backlight switching to create a 240Hz effect), LED backlighting (which gives a 2,000,000:1 contrast ratio), and 25mm thin LCD TVs. The hot LG story is around its deals with internet content providers. Netflix, Youtube, Yahoo and other providers will appear as menu options on a range of connected devices, including TVs. LG also introduced an 802.11n BD player, one of the few integrated wireless enabled BD players on the market. Netgear also gave a strong performance, centered around its ITV2000 internet TV player, launching in summer 2009 at $199. This is a compact, pocket-sized set-top box which will give access to web content, including the inevitable Youtube, without the need for PC connectivity. Netgear also introduced its Digital Entertainer Elite, priced at $399 and available in February. This device incorporates a 500GB HDD and plays HD video at “up to Blu-ray quality”. I suppose that means something close to Blu-ray if the wind is blowing in the right direction. Toshiba, rather strangely, began their press conference by highlighting their leadership in “TV combos”, ie combined TV/DVD players. Not exactly technology innovation, but I suppose they had to find a market leadership story to start with. The new stuff focused on the introduction of internet widgets in TVs and other devices from the likes of Intel, Yahoo and Microsoft. Toshiba highlighted a number of content service providers on their presentation material, including Myspace, CinemaNow, Yahoo and CBS, but the fine print indicated that these names were shown “for demonstration purposes only”, suggesting that partnership deals are still at the negotiation stage. Toshiba’s approach to internet content is based on Microsoft platforms such as the Media Center PC, which is not surprising given its stronghold in the PC market. In the TV space, Toshiba announced the introduction of Dolby Volume, which balances volume levels across different TV channels so that viewers don’t have to keep adjusting volume levels. Dolby told me the technology has been a success in Japan for the past year and is now making its way to the US and Europe. Toshiba also indicated that the long-awaited Cell TV is on the horizon. Using the Cell processor at the heart of the PS3, this will be launched in 2009. Cell TV could allow 6 simultaneous HD streams to be recorded, support the next generation of 4k x 2k panels and allow for 3D graphical interfaces. Client Reading: IFA 2008: Internet and 3D Offer Hope During Europe's CE Recession

Today's launch of the first dedicated free-to-air satellite service, Freesat, will help inject some much-needed competition into the UK's HDTV market. Even though its HD performance has been disappointing, Sky Digital remains the only major source of HD broadcast content in the country, notwithstanding Virgin Media’s offer of on-demand HD video. Freesat has been four years in the making and is a joint venture initiative of the BBC and ITV. 17.9% of the latter, of course, is still owned by BSkyB. Although Sky has been directed by Ofcom to reduce this stake, the matter is currently under appeal. Whatever the result of that lengthy dispute, Sky’s holding does not seem to have prevented ITV taking the significant decision to restrict its own soon-to-be-launched HD service to the Freesat platform, thus providing Freesat with a competitive advantage over Sky’s HD service, whose paying subscribers will not be able to see ITV HD. How much of a disadvantage that is for Sky, only time will tell. But given the paucity of choice in HD broadcasting today, and the continued popularity of ITV programmes, it should at least provide some pressure on Sky. The other HD channel on Freesat, BBC HD, is also available to Sky viewers. ITV and the BBC, more than most, will be regretting the exit of England and the other home nations from the finals of the European Championships, for which they will be providing live coverage. Live games in HD could have provided a significant boost to Freesat uptake. The major difference from Sky of course is that Freesat viewers will not have to pay a monthly subscription for their HD programmes. BBC and ITV alone would not appear to be a huge attraction for viewers to buy and install new HD set-top boxes at £200 or more, so much will depend on persuading other channels to launch HD over the coming months. As we have discussed, free-to-air HDTV (excluding well-funded public broadcasters like the BBC) is a challenging business model until wider platform reach has been established, so we can expect Sky to continue to lead in HDTV service adoption. But competition is usually a good thing, and Freesat will put modest additional pressure on Sky to improve its own range of channels and bring costs down. Freesat channels at launch are listed below (EPG channel numbers in brackets). There are in fact around 40 discreet mainstream TV channels. The remaining 80 comprise shopping, radio and regional feeds of the main BBC and ITV channels. Entertainment (101-199) BBC One (101) BBC Two (102) ITV1 (103) C4 / S4C in Wales (104) BBC Three (106) BBC Four (107) BBC HD (108) ITV2 (113) ITV3 (115) ITV3+1 (116) ITV4 (117) S4C Digidol / C4 in Wales (120) E4 (122) More4 (124) Zone Romantica (135) Zone Thriller (137) News and Sport (200-299) BBC News (200) BBC Parliament (201) S4C2 (202) Al-Jazeera English (203) Euronews (204) Movies (300-399) Film4 (300) True Movies (302) True Movies2 (303) Movies4Men (304) Movies4Men2 (306) Lifestyle (400-499) Wedding TV (402) Overseas Property Channel (411) Men and Motors (450) Music (500-599) Chartshow TV (500) The Vault (501) Scuzz (502) Bubble Hits (503) B4U Music (504) Children (600-649) CBBC (600) CBeebies (601) CiTV (602) POP (603) POPGirl (604) Tiny POP(605) Special Interest (650-699) Teachers TV (650) Radio (700-799) BBC Radio 1 (700) 1Xtra BBC (701) BBC Radio 2 (702) BBC Radio 3 (703) BBC Radio 4 FM (704) BBC Radio 4 LW (705) BBC Radio Five Live (706) BBC Radio Five Live Sports Extra (707) BBC 6 Music (708) BBC 7 (709) BBC Asian Network (710) BBC World Service (711) BBC Radio Scotland (712) BBC Radio nan Gaidheal (713) BBC Radio Wales (714) BBC Radio Cymru (715) BBC Radio Ulster (716) BBC London 94.9 (718) Shopping (800-849) QVC (800) Price Drop TV (801) Bid TV (802) Pitch TV (803) JML Lifestyle (810) Interactive (900-949) BBCi Regional (950-999) also accessible via BBC One/BBC Two BBC One London (950) BBC One Channel Islands (951) BBC One East (W) (954) BBC One Northern Ireland (957) BBC One Scotland (960) BBC One Wales (964) BBC Two England (968) BBC Two Northern Ireland (969) BBC Two Scotland (970) BBC Two Wales (971) ITV regionals accessed via ITV1 London (not listed separately) Ulster STV Scottish East STV Scottish West ITV1 Wales ITV1 Border England ITV1 Central West ITV1 Granada ITV1 Anglia East Channel TV STV Grampian North Client Reading: HDTV Channels Shut Down: A Sign Of Things To Come?

One way of keeping people away from the video on their PC screens is to give them better television through their set-top boxes. Sky is one of the first broadcast platforms to offer "push-VOD" to digital TV customers through its Sky Anytime service. Around 1.5 million homes in the UK have Sky Digiboxes capable of accessing this service (including all their HDTV subscribers), which downloads selected (by Sky) programmes to the hard drive so that they are available for instant viewing. New Media Markets reports that Sky is claiming that Anytime is now the most popular "channel" after the five UK terrestrials. It doesn't back this up with the relevant data, but does indicate that viewers use Sky Anytime on average for 28.4 minutes each time they use it, which is more than ITV1, BBC1 or Channel 4. It also doesn't indicate the degree to which usage of Anytime is taking away from regular PVR usage, ie viewers watching their own recorded programmes. I have no doubt that Anytime is proving popular. Like all free VOD services it is an important reducer of churn and raises customer satisfaction. Sky's claim that it is a "channel", however, is stretching things a little. I can understand "platforms" wanting to see things this way, as they are selling the advertising for this product, but I'm not sure the TV channels themselves will concur. Right now, Sky gets all the advertising revenue around Sky Anytime programmes, so channels are effectively giving away their programmes for free. This cannot last. As Anytime increases its audience reach (it is only used by 3% of UK homes today), the channels will be demanding a fair cut of the cake or will withdraw their programmes from the service.