This year’s IFA www.ifa-berlin.de nicely summed up the opposing challenges facing the next wave of TV technologies. The plethora of new connected TVs on display from every major manufacturer seemed barely able to cope with the variety of Internet and managed content and applications available. By contrast, the many 3D-enabled TVs seemed starved of suitable material with which to show off their capabilities. Watching the 3D story unfold at IFA also served as a nice hors-d’oeuvres to this weekend’s IBC in Amsterdam, when you can learn more about industry and consumer adoption of 3D at our Analyst Forum: it’s not too late to register at www.strategyanalytics.com/ibc2010.html. Given that internet TV, or connected TV, or “smart TV”, depending on your preferred nomenclature, has been at least a decade in the making, perhaps it is inevitable that it seems to be making faster progress towards mass market adoption than 3DTV, which, in spite of decades-old visions, has really only begun to gather speed in the last year or two. Nevertheless, it was clear from duplicate and triplicate demonstrations of the same 3D animated movies and football games that the dearth of 3D-originated content remains 3DTV’s biggest challenge. Which makes it all the more strange that most of IFA’s big names were extremely reluctant to promote the ability of their 3DTVs to turn bog standard 2D into 3D content, on the fly and with no additional hardware required. As various Sony, Panasonic and Samsung representatives explained, to one degree or another “in-set” 2D-3D conversion was not yet considered “good enough” to warrant live demonstrations to the German technology-buying public or indeed the rest of the industry. Sony came close to giving the game away: the information board behind a line of 3DTVs noted the fact that any 2D content could be converted to 3D “by pushing a button on the remote control”. But when asked to demonstrate this functionality we were informed it was not possible on the show floor. Samsung’s stand also featured a large number of 3DTV demonstrations, all of which featured 3D-originated content of one sort or another. The only real time 2D-3D conversion demonstration featured games material. Other 3DTV sets around the stand could be switched to 3D conversion but staff were unable to supply glasses so that the effect could be appreciated. Panasonic’s representative was open in admitting that the company was behind in devlopment of in-set 2D-3D conversion technologies, and only included it as a feature “because everyone else was”. I got the strong sense that staff on many stands were tired of deflecting questions about 2D-3D and that their lives would have been made slightly less tedious if demonstrations had been available. The major exception to this was of course Toshiba. Of course, because Toshiba continues to push its Cell processor technology as a platform for real-time rendering and upscaling of 2D to 3D content. Toshiba was the major firm least backward in coming forward with in-set 2D-3D conversion, offering a number of demonstrations open to public view. These included one which claimed to offer conversion of “regular” 3D TV broadcasts to “full” 3D. The demonstration offered side-by-side comparison of otherwise identical content. To my own eyes this was not too impressive, with artefacts clearly visible in the upscaled version, even if the overall effect from a distance was greater sharpness. It was certainly a long way from matching the Blu-ray 3D experience. Toshiba also demonstrated “standard” 2D-3D conversion, which was less problematic although mild “ghosting” effects were visible. However the 3D effect, while obvious, lacked any great depth. Having said that Sony’s TV people were not discussing “in-set” conversion, around the corner the company’s Vaio group had probably the most impressive real-time 2D-3D conversion I have yet seen. A prototype Vaio used a combination of hardware (graphics card) and software (both in prototype development stage) to convert 1080p MPEG4 video to full HD 3D (2*1080p), the equivalent of the Blu-ray 3D standard. The product is currently targeted for Q1 2011 availability as a notebook product. 3D was selectable on the prototype by pressing a 3D button. Clearly the processing power required for this impressive demonstration is unlikely to feature in a TV set in the near future, but it is surely only a matter of time before it becomes widely available in mass consumer products. The sensitivity around 2D-3D conversion was the story that dared not speak its name at this year’s IFA. Yes, the technology is immature and the quality falls short of “true” 3D productions. But that will change and the content-owner dam which is currently holding it back will eventually break. As we will see at our 3DTV Analyst Forum, the TV production industry itself remains unconvinced that it should invest in 3D technology until issues such as this begin to settle down. Meet Our Analysts: 3DTV Analyst Forum at IBC 2010

Toshiba's press conference focused almost exclusively on the launch of Cell TV in the US market. We have followed the progress of Cell technology for nearly the past decade, since Toshiba, Sony and IBM began its development. As a reminder, it lies at the heart of the PlayStation 3 system, and Toshiba has always made its intentions clear to launch a range of other consumer devices using the processor technology. Cell TV will use Cell for various capabilities: to deliver 3D pictures from 2D sources; to upscale video, including video from internet sources; and to support “Autoview”, which sets the TV picture automatically and adjusts for the room’s colour temperature. I did not get the chance to examine the performance of Cell in these tasks – I hope to see detailed demonstrations later this week. Cell TV will be Toshiba’s flagship model this year. It will also feature a range of connected TV features, including wireless HD (the WirelessHD standard), 802.11n, DLNA, USB movie, Net TV channels and videophone. Yes, like LG and Panasonic, Toshiba is also entering the rapidly emerging big screen videoconferencing space. The launch of Toshiba’s first Blu-ray player was mentioned more or less in passing, and it will be upgradeable to 3D capability. However, we question Toshiba’s commitment to BD given the company’s belief that “the future of video is online, and discs are in decline”. It seems the bitter legacy of the HD-DVD saga has not been easily forgotten. Client Reading: HDTV: Standards Muddle Clouds Outlook For Wireless Displays

Recent research from renowned polling firm Harris Interactive has put the cat among the Blu-ray pigeons by claiming that 11% of US homes now own an HD-DVD (yes, HD-DVD) player, compared to 7% which own a Blu-ray player. If true this would be great, if inexplicable, news to Toshiba, which, as its major proponent, abandoned HD-DVD technology more than a year ago after Warner famously jumped ship to join the Blu-ray camp. I doubt that even Toshiba will give much credence to the Harris research, however much it would love to. Quite where the 12 million HD-DVD players supposedly connected to American TV sets have come from is unexplained in the Harris survey: presumably some mystery factory in the Chinese hinterland has been churning them out and shipping them via newly discovered shipping routes (past the melting icebergs north of Russia, perhaps) and unbeknownst to the rest of the world. There is a serious message from these clearly erroneous results, however (for the record, much less than 1% of US homes currently have an HD-DVD device of any description, and that percentage is falling). They once again demonstrate how difficult it is to get accurate answers about technology from consumer surveys. Years ago, before HDTV sets or services had been launched in Europe, we used to include questions about HDTV ownership and interest in our user surveys, and without fail we found at least a few percentage of people who thought, for whatever reason, that they already owned and were watching HDTV. And why should we blame consumers for the confusion? Even as someone who follows the industry on a day-to-day basis, I try to keep my “ordinary consumer” hat on stand-by. Listening in on discussions between salesmen and customers on the retail floor is always an eye-opener, and I symphathise with both sides. Why should either customers or shop staff be expected to learn the complex language of the technology industry? If the store is demonstrating an HD-capable TV alongside an upscaling DVD player, the images could look pretty good, and why would I, as an ordinary customer, not want to describe what I’ve seen as “HD DVD”? So a question in a survey which asks about “HD DVD players” will inevitably be interpreted in many different ways. I suspect there are even Blu-ray Disc player owners who, if asked in the right (or wrong) way, would say they owned an “HD DVD player”. The thing play “DVDs”, and it plays in high definition. Seems to make sense to me… It’s not as if most people had ever even heard of HD-DVD (the Toshiba standard). In spite of the hype surrounding the whole standards war within the technology industry, I believe it failed to interest or concern the majority of the population. So why should they have a problem using the same term however they please? So the real problem for the Blu-ray camp is not the numbers from the Harris survey – everyone knows they are simply wrong. It is the fact that consumers thought they were saying the right thing, and are clearly thoroughly confused by the whole world of HDTV, discs, formats, standards and terminology. It’s time to stop blaming consumers for being confused simply because Blu-ray still hasn’t got its message across effectively. Twitter: twitter.com/DavidMercer_SA Client Reading: Digital Media Devices Global Market Report

Pioneer’s plasma TV business is the latest casualty of the recession. The company announced today that it is ceasing TV development immediately, and will close its TV business altogether by March 2010. So it looks like Panasonic will be the only major Japanese vendor left holding the plasma baby in 2010, as I discussed 18 months ago. Koreans Samsung and LG will help to keep plasma going, but are increasingly focused on LCD and well behind Panasonic in the race for PDP market share. Pioneer tried in vain to hold the line on premium, high quality TVs. In fairness it was always going to be difficult even in good economic times. Pioneer’s TVs were generally regarded as some of the best on the market and served as an aspiration for those who could “only” afford a Sony or a Samsung. But the gap between the “mass market” and Pioneer was undoubtedly getting narrower, and Pioneer was going to get caught in the squeeze sooner or later. When Amazon is offering Toshiba 42” 1080p LCD TVs for £499, it becomes harder than ever to justify paying four times the price for a similar sized Pioneer, especially when most retail stores are simply not capable of, or interested in, demonstrating the differences in picture quality. The severe downturn in consumer electronics has accelerated the impact of plasma’s relative decline on Pioneer. What is left of the company’s display technology expertise now resides with Panasonic, and even in this downturn that huge company should be powerful enough to keep plasma alive for a few more years. It will be a long and lonely struggle. Client Reading: Digital Media Devices Global Market Report

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

News reports today suggest that Pioneer is about to bite the bullet and exit manufacturing of plasma displays. It is in negotiations to have the panels made by Panasonic, but Pioneer would continue with its own R&D and assembly. Pioneer has fallen well short of its sales target and its investment in Kuro technology has failed to stem the decline. A company spokesman claimed that the only way to stay in the plasma business was to make a product that is "so much better than anyone else's", which is what Kuro was intended to be. It seems even that has not been enough. Pioneer's news is not unexpected: the company had already announced its entry into LCDs for sub-42" TVs, and is part-owned by Sharp. But as one of plasma long-term stalwart supporters Pioneer's decision to cease manufacturing is a significant moment. Whether Panasonic can continue to meet Pioneer's exacting standards remains to be seen. It is no small irony that Pioneer's execs have persuaded at least this observer, with detailed side-by-side demonstrations, of the superiority of their displays in comparison to those of their competitors, yes, including Panasonic... There are two messages from Pioneer's decision to pull the plasma plug: 1. Any remaining Plasma supporters need to watch the bottom line very carefully, even if they do have the scale of Panasonic 2. Japanese firms are increasingly willing to address financial realities by making tough decisions to drop support for commercially failing technologies The latter point will resonate with Toshiba, of course, after the HD-DVD saga. Competing technologies need ardent advocates but when the CFO points the finger it's time to say sayonara... Client Reading: Flat Panel TV Global Market Forecast Panasonic's AV Strategy: Plasma Success Will Not Prevent Revenue Shortfall

As Toshiba considers giving the last rites to the HD-DVD format, the last major objector is likely to be Microsoft. As Strategy Analytics has noted in its research many times, Microsoft's strategic objection to Blu-ray Disc stems from its use of Sun's Java technology as the basis for its interactive applications. There is nothing inherent in the disc format itself that would prevent Microsoft offering a BD drive, for example, as an add-on to the Xbox 360. Likewise, BD drives are available for Windows XP and Vista PCs, although support for the BD format is not native to either OS: users must install a third-party application such as Cyberlink's PowerDVD Ultra in order to watch BD movies. Significantly perhaps, Microsoft also never included native support for HD-DVD in its Media Center platforms. Toshiba would be unlikely to withdraw from HD-DVD completely without Microsoft's approval unless it wants to risk upsetting a key strategic partner. Microsoft's decision will hinge on three key questions: - Does it need to support a high definition disc format at all? - Could HD-DVD still survive purely as a PC format? - Could Microsoft realistically support BD without supporting Java? There are doubtless many Microsofters who believe the disc content business model is dying anyway, given the success of its Xbox Live HD video download service and the explosion in web-based HD content. Realistically, however, it will be a few years yet before broadband and the internet infrastructure can support HD streaming and downloading on an equivalent global scale to a disc platform. We have previously argued that there is no reason HD-DVD could not continue as a PC format, even as it was always bound to fail in set-tops. The dynamics of the PC industry mean that dual-format drives could become cost-effective relatively quickly if there was sufficient support from manufacturers. But it seems inevitable now, given the tidal wave of support for BD, that HD-DVD will lose support from any remaining hangers-on, so there seems little need even for dual formats in PCs. So can Microsoft ever live with Java? Our conversations with the company suggest a resounding No. So if BD drives are going to appear for the Xbox 360, as some rumours suggest, they will either not include Java, or will be developed by third parties. Either that, or a remarkable declaration of peace is about to break out between two old IT enemies. One way or another, Microsoft is HD-DVD's last hope for survival. Client Reading: High Definition TV and Video Devices: Global Market Forecast

Strategy Analytics surveyed various emerging wireless video connectivity technologies early in 2007. We concluded at the time that a winning standard was unlikely to emerge within a couple of years. In particular there were doubts over the availability of the newly formed WirelessHD consortium's technology, which, while it clearly represented the most advanced proposed solution, was unproven and some time away from commercial availability. This morning we were lucky enough to be the first to see SiBeam's demonstration of WirelessHD (WiHD) technology in a private suite away from the CES floor. Besides proving that the technology works, the WirelessHD group is expecting a number of manufacturers to announce WiHD products during 2008, and indeed at their CES press conference this morning Toshiba highlighted this as one thing to look out for in future announcements, although no timing was confirmed. SiBeam's demonstration had set up a Blu-ray Disc player to stream an uncompressed 1080p version of Ice Age to a 50" display. It also transmitted a live HD video camcorder to the same display. Picture links are below. SiBeam video camera SiBeam TV Video quality was certainly impressive, and the streaming was unaffected by line of sight interruptions because of the technology's multi-antenna approach. WirelessHD believes there are four key requirements from Hollywood to gain studio support: strong encryption, established copy protocols, uncompressed video, and proximity control. The latter is intended to ensure that content remains within the home, if not within the room itself. For this reason WirelessHD is concentrating on supporting a single AV system around a "coordinating device" (ie a TV), rather than the whole home network. Competing solutions claim that WiHD is some time from market availability, whereas alternatives are available now. PulseLINK in particular is claiming that its first products, in partnership with Westinghouse, will be available from the middle of 2008, with dongles arriving in the fall. The WirelessHD group itself believes the first consumer products will begin to emerge at the end of this year, and that CES 2009 will be a key launchpad. Pricing will of course be critical, and that again is something that is difficult to determine at the moment. But the group expects that manufacturers will be able to target price points set by alternative technologies. In this case we would be looking at a $200 retail price premium for an integrated device, or $300 for a dongle. Whether that can be achieved at product launch remains to be seen. We suspect that the first retail WiHD products are likely to command somewhat higher premiums, but much will depend on the consortium's key members demonstrating large scale commitment to drive volumes as rapidly as possible. As in most things CE, there is certainly no sign yet that any particular technology is going to dominate in the early days of this emerging market. Client Reading: HDTV: Standards Muddle Clouds Outlook For Wireless Displays

On the plane back from last year's CES (Jan 07) I was chatting with a technology journalist who was drooling over the prospect of writing endless articles on the juicy HD disc war. I promised him that by the time of the next CES it would be more or less over. He was none too pleased at the prospect of having to find another technology battle to fill the column inches. And the media has indeed revelled in the to-ing and fro-ing of the disc wars over the past 12 months, implying for the most part that things are too close to call. I'm afraid more than a few analyst firms have also been caught up in the "will it/won't it" debate until very recently as well, suggesting that the battle will go on for a long time to come. They shall remain nameless. Warner's announcement today that it will drop support of HD-DVD and support Blu-ray Disc exclusively confirms the Strategy Analytics prediction (see previous multiple blog entries) that BD was going to win. The game is surely over when Warner, the studio that gave the original DVD its lifeline, in partnership with Toshiba, HD-DVD's major supporter, jumps ship so spectacularly. Hyperbole is all too frequently manifested in our industry, but the Warner decision surely comes close to qualifying for the "historic" category. It puts any further CES announcements in the shade and confirms our long-held belief that BD will win the HD video disc battle. The stunning endorsement of Warner that "consumers have clearly chosen blu-ray" is about a big a black eye for a consumer technology as I can ever remember. Paramount's and Dreamwork's lawyers will be checking the fine print as we speak to find a way out of their exclusive HD-DVD deals. Microsoft is expected to make announcements about a new Xbox 360 SKU at CES (maybe, maybe not HD-DVD). Toshiba will do its best to put a positive spin on its dying technology. But nothing can save it now, at least as a video publishing medium. Let's move on. A new story awaits for 2008.

A couple of footnotes to previous posts on the next-gen disc saga. 1 - Blockbuster’s decision to roll out BD discs to 1700 stores, keeping HD-DVD to only 250. 2- Toshiba will include HD-DVD as standard in its laptops from this summer. Both developments confirm our analysis that the swing towards BD as a content platform is inexorable. Toshiba will fight with all the tools in its armoury, but laptop HD-DVD drives are unlikely to drive much demand for pre-recorded discs. Blockbuster’s decision is a throwback to the VHS-Beta battle 30 years ago, when wider retail and rental availability of VHS pre-recorded tapes was a decisive factor. Supporting its decision, Blockbuster cites its own data that 70% of next-gen disc rentals so far have been BD, suggesting that, in spite of standalone HD-DVD players being first to market, the PS3 may be driving some movie consumption.