We met with Boxee which was demonstrating its first set-top box, developed by D-Link and based on Nvidia’s Tegra 2 chip. This is a powerful platform allowing full HD capability. The box will not include an integrated HDD in order to keep the price below $200, but supports USB drive attachments. It will ship in 1H10 in the US and Canada. Boxee let slip to us that they also expect it to be available “shortly after” in Europe. Boxee currently has 750,000 users through its PC-based platform. This device is certain to give a boost to those numbers and looks like a compelling new entry into the connected TV market. Meanwhile, Yahoo continues to make progress with its connected TV offer. In spite of our scepticism over the widget strategy, based on our own user research, Yahoo expects to have shipped between 3 and 5 million TVs globally by the end of Q110. 60% of sales have been in Europe and the remainder in the US. The company’s target is to have shipped in between 10 and 12 million devices by 2011. Like other connected TV companies their goal is to develop a large scale platform from which monetisation of app stores, advertising and other opportunities can be realised. As things stand today Yahoo appears to be fairly well positioned, but it will come under threat from many alternatives over the next few months, and TV manufacturers will be wary of becoming too dependent on a single partner. One competitor could be Sonic Solutions’ Roxio/CinemaNow platform, which is being repositioned as a white label service for retailers and device manufacturers. Indeed, as we were meeting Sonic was in discussion with one of the major US retailers. It makes sense that retailers would be interested in selling connected TV services in addition to the devices on which they make small margins. We can expect to see a great deal of activity in this space in the US and Europe over the coming year as the connected TV landgrab continues. Client Reading: Consumer Imperatives for Digital TV Media Browsers

The standards battle in 3DTV for home applications has already begun, and it’s not just between competing systems. There is also a division in the industry between those who believe new standards are necessary, and those who don’t. BskyB’s Director of Strategic Product Development, Gerry O’Sullivan, stunned NAB conference attendees by claiming that no new standards were needed to get home 3D off the ground. He claimed simply that the standard already exists, “and it’s called HD”. Sky has already trialled several 3D broadcasts in the UK and is satisfied that the technology works today and can be deployed to customers of its existing HDTV service using HD PVRs already in the field. For what it’s worth, I thought Sky gave some of the most impressive of the many 3DTV demonstrations I have seen at NAB. O’Sullivan played clips of a Liverpool football game broadcast in 3D at the end of last year. One particular shot, taken at pitch level behind Stephen Gerrard as he fired a corner away from the viewer and towards the penalty area, demonstrated how much more effective 3D can be compared to 2D. This was the best example I have seen so far of a 3D production offering an experience that came close to being a spectator at the game. It also illustrates some of the creative challenges involved in developing compelling 3D material compared to traditional 2D approaches. O’Sullivan concluded his speech by hinting strongly that Sky would forge ahead with its own approach to 3D programme creation and broadcasting, regardless of the intentions of other industry players. This strategy would continue Sky’s long tradition of innovation in new services and ensure that, as other broadcasters begin to follow Sky by rolling out HDTV, Sky stays one step ahead by introducing the next technology. If Sky does begin to offer 3DTV without consulting on standards, it is likely to create divisions and disharmony across the industry value chain. As we heard in other presentations, there are multiple alternative technical approaches to creating, delivering and displaying 3D TV and video to the home environment, and universal compatibility across these approaches does not exist. In fact, according to Brad Hunt of Digital Media Directions “no single 3D format is supported by all the 3D-ready TVs currently available on the market”. That analysis applies largely to the US market, where a few 3D-ready TVs from a handful of manufacturers have been sold in the last few years. In the UK, Sky may be able to get away with driving its preferred approach because few if any 3D-ready TVs have been sold. But we can be sure that other broadcasters and technology vendors will kick up a fuss if Sky appears to be getting its own way without wider consultation. It is unlikely they can do anything to stop Sky launching 3DTV services, in which case customer confusion and standards wars seem inevitable. Twitter: twitter.com/DavidMercer_SA Client Reading: Western Europe Digital Television Forecast: 1H'09 Buzz up!vote now

Most of the discussion and presentations on the question of 3DTV here at NAB seem to start with the assumption that the vast majority of consumers will prefer 3D to 2D, but that’s not clear to me from some of the data presented. CEA research of US viewers presented by David Wertheimer, CEO of the Entertainment Technology Center at USC, suggests that, of people who have seen a 3D movie at the cinema, only 38% say they prefer 3D to 2D of the same presentation. In other words, nearly two thirds of people who have seen 3D are neutral or actually prefer 2D. The impact on home viewing is even less marked: Of 3D movie cinema viewers, only 1 in 5 say they want to watch 3D at home. Much of this may have to do with the fact that consumers simply see the theatre/cinema experience as completely different from anything they watch on TV at home, or that they see movies as different to much of the content they would normally see at home, such as documentaries, news or sports. Once they see those in 3D as well, the interest levels in home 3D viewing may rise. But it doesn’t seem to me like a very good start for 3D at home. As I reported recently, my own anecdotal evidence suggests that people can easily be nonplussed by the 3D cinema experience. NAB conference attendees who applaud clever creative and technical cinematic presentations are not typical of the wider public. I’m sure home 3D television and movies will come one day, and some consumers will be prepared to spend money on it. But apart from the user experience challenges, there are serious business model hurdles to overcome. Don’t be fooled by the fact that 3D theatre presentations may be outgunning the equivalent 2D shows at the box office. Theatre/cinema receipts alone are nowhere near enough for the studios to recoup their investments. Until there is a viable home 3D delivery channel the 3D movie explosion we are currently seeing is simply a loss-leader for Hollywood studios hoping to recoup those investments over the much longer term. Buzz up!vote now

Much of the commentary around Cisco’s push into consumer devices has focused on its wireless audio system, home media hub and, most recently, the newly acquired Flip Video business. But as we discuss in our new report published today - Cisco's Consumer Strategy: Will the Network Transform the Digital Home?  – the company’s long term success is likely to depend as much, if not more, on the less high profile media strategy as on its forays into consumer electronics. Cisco’s Media Solutions Group (MSG) was formed more than two years ago but only came out into the open at the beginning of this year. Its objective is to sell the benefits of network-based internet media delivery platforms to content owners. It claims to save content owners from a great deal of the pain usually associated with establishing and maintaining content-focused websites. Critically, it also intends to be synergetic with Cisco’s consumer devices so that problems associated with content re-purposing and re-formatting across multiple devices, something which is a real cost concern to media companies, can be minimised. MSG’s core offer is the Eos platform, and you can see it in action at allseanpaul.com. Our report finds that Cisco has a good opportunity of reaching annual revenues from consumer activities that will put the company in a league similar to some of today’s leading technology brands. It will surprise some that the company already does business in the region of $4bn in consumer related sectors through its set-top box and home networking operations. With a substantial cash pile to support further acquisitions, and with the rest of the consumer electronics industry suffering from the global economic turmoil, it is much too soon to write off Cisco’s chances of sustaining an assault on the market leaders over the coming years. Twitter: twitter.com/DavidMercer_SA Client Reading: Cisco's Consumer Strategy: Will the Network Transform the Digital Home? Buzz up!vote now

At Pepcom's Digital Experience press event we chatted with Yahoo about their approach to web TV. It certainly seems the company, which has been struggling in recent times, has finally been making some progress in its TV strategy. It has signed deals with Samsung, Sony, LG and Visio to incorporate its widgets engine in their internet-enabled TVs. All this talk of internet on the TV screen really does make me feel my age. When I mention that we were having similar discussions 10 or even 20 years ago there is rarely any recognition that interactive TV has been tried many times over, and has usually failed. Of course today's innovators are convinced that the power of today's internet can solve many of the problems that prevented previous interactive TV platforms from becoming successful. There's no doubt that a fast broadband connection straight to the TV is a far cry from those early days of dial-up internet connections. But the question of whether or how many consumers really want to see anything but "television" or "video" on their "TV set" remains unresolved, whatever the technology used to bring them these exciting new services. Yahoo seems to have convinced its partners, for the moment at least, that there is some level of interest in the ability to have internet-based mini-applications on various parts of the TV screen, showing the usual weather, stock prices or latest news. Strategy Analytics research suggests that this type of application is not in fact at the forefront of TV viewers’ expectations from internet TV browser technologies. In fact in a recent survey we carried out for Oregan Networks by our Digital Home Observatory team, widgets and user interface customisation were ranked among the lowest priorities. The highest, not surprisingly, were the ability to access video on demand services from the internet, and to search for video content already stored on the home network. But in various demonstrations we have seen here at CES, not just at Yahoo, video is not given the priority consumers clearly expect. That may well reflect the fact that the various web TV value chain partners – TV manufacturers, platform developers, content owners – are far from confident that today’s internet connections can deliver the sort of video experience consumers are expecting on big screen TVs. And they are obviously right to be nervous in this respect. It will take time and lots of education to overcome the obvious quality and reliability issues. But to build demand for internet enabled TVs there needs to be a greater focus on internet-based video and television services, because this is what consumers think internet TVs should have as a core capability. Everything else is simply icing on the cake, and some people clearly prefer the cake without the icing. Client Reading: Digital Media Survey: An analysis of US Online Premium Video Users

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

BT launched its Total Broadband Anywhere service today. It is available to Option 3 broadband customers starting at an additional £5/month and includes a free smartphone. The contract is for a minimum of 18 months. The “50” option (£5/month) includes 50 minutes and 50 texts over Vodafone’s network. Higher price packages are available, up to £35/month, which includes 600 minutes and 700 texts. All packages include unlimited WiFi downloads and 10MB of data over GPRS connections. Two BT ToGo smartphones are available initially, both from HTC (whose brand is also on the devices) – the HTC S620 and S710. BT’s Gavin Patterson told us that he was working with other phone vendors and expected more devices to be available in future. 3G is also a possibility for the future, although BT does not believe it is necessary today, and clearly there are other network access technologies, such as Wimax, which may come along as well. The basis of BT’s Anywhere package is WiFi, so the devices will connect to the home wifi network, BT FON hotspots (currently 82,000 in the UK and an additional 190,000 worldwide), and 2500 BT Openzone hotspots in the UK and Ireland. The devices are based on Windows Mobile and preconfigured with customers’ BT Broadband settings, so that BT Yahoo email works “out of the box”. Other email accounts are also set up easily, simply by inputting an email address. Mobile security is also integrated. BT Broadband Talk is available at WiFi hotspots. I asked BT if this announcement represented the company’s mobile strategy, and the answer is a qualified “no”. It is first and foremost an extension of the company’s broadband offer, and gives customers the option to use a portable broadband device in mobile situations. If BT Broadband customers choose to drop their mobile service provider, the BT ToGo phones clearly allow them to do this, at a cost. Although BT wouldn’t put a number on it they clearly expect that a reasonable number of broadband customers will use BT ToGo as their main mobile service over time. At the same time they claimed they were not going “head to head” with other mobile service providers like Vodafone and Orange. If ToGo does start displacing mobile phone contracts, this could clearly change. The biggest concern with BT's approach is that it relies on a network partner's 2.5G service outside of WiFi hotspots. 10MB does not go very far for web browsing or any serious media applications, and while BT suggests most people will be happy just to download a few emails, it remains to be seen whether this will be a limitation for most users. Client Reading: Google-backed FON Movimiento: Peace, Love and Free WiFi

The BBC has announced the launch of its iPlayer for July 27th, several months earlier than expected. The iPlayer will be free to use (for UK licence fee payers) and will allow broadband Internet users to watch TV or radio programmes broadcast on the BBC's TV and radio channels in the previous seven days. Programmes will be available for streaming or download up to seven days since first broadcast. Downloaded programmes can be used up to 30 days after broadcast. The iPlayer is only Windows-compatible at launch but a Mac version is in preparation. The BBC says it is in discussions with distribution partners such as MSN, Telegraph.co.uk, AOL, Tiscali, Yahoo, Myspace, Bebo and Blinkx. There will doubtless be plenty of hype around this news for the next few weeks, not least from the BBC news service itself. The real news story is the availability of TV programmes rather than radio, which have been available online for many years. The iPlayer should be a slick application, and it is another step forward for the UK market in the global drive towards web TV. But as I have often pointed out to Strategy Analytics clients, broadcasters in other countries have offered this sort of service for some years. I usually cite NRK, the Norwegian public broadcaster, which offers vast archives of TV programmes available for online streaming (eg here). So while the BBC has been lagging behind other players in recent years, it could now leapfrog competitors with a powerful application and a wide range of valuable content. The concept of "always available" is gradually changing the TV industry as broadcasters wake up to the threat and potential of broadband, but business models still reflect the era of scheduled broadcasting. That will surely begin to change as we learn more about the demand for "catch-up TV" and other emerging digital services.

A dominant theme at CES is what I call Internet TV (as opposed to IPTV, which tends to refer to managed, operator-delivered services). Microsoft have confirmed their intention to add internet TV to the Xbox 360 (something we've predicted since day one). More significantly, Sony announced that future Bravia TVs will be IP-enabled and are demonstrating their Internet Video Link device, which delivers managed internet video content to TV sets. Deals have been struck so far with AOL, Yahoo! and Grouper. FCC Chairman Kevin J. Martin and Commissioner Tate happened to be getting the demonstration when I dropped by (their schedule took priority, naturally enough...). I imagine there are some interesting debates at regulators right now over what exactly they should be calling this thing that gets TV and video content to the TV without involving the TV "providers" they like to regulate.

Cisco is the other firm to watch. Chairman and CEO John Chambers gave a typically powerful keynote suggesting that his firm would be enabling the transformation of consumer electronics over the next five years to a completely IP-based environment. Ambitious timing, perhaps, but a company with this sort of record and business performance cannot be ignored. Whether Cisco's strategy pans out or not, the transformation of digital devices in this timeframe is certainly assured.