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

Thomas Edwards, VP, Digital Television Testing & Evaluation, at Fox, was speaking this morning at the Digital Cinema Summit at the Las Vegas Convention Center, one of the many conference programs running concurrently with the NAB Show over the next few days. Fox, of course, is a sister company to BSkyB under the News Corp parent, and BSkyB, as we have regularly reported, is a firm advocate of 3D as the next major business opportunity. So it would be interesting to see Fox and BSkyB executives debate the business viability of 3D after Mr Edwards’ comments that he “doesn’t know if 3D can make money”. Edwards listed some of the obstacles he is facing as Fox experiments with 3D production and broadcasting. 3D equipment, particularly cameras and rigs, are still “hard to obtain”, and are fragile, large and heavy. Stereographers, the specialists responsible for the 3D experience, need to be trained. There are design issues such as placement of the score box and other graphics. There are issues of quality with broadcast 3D, which today (under BSkyB and Fox’s current side-by-side approach at least) is sub-HD quality. And there are challenges associated with keeping the 3D material in synch throughout the various stages of production. Edwards also didn’t seem to be convinced that 3D necessarily improved on the 2D experience when it comes to sports productions. He noted in particular that wide shots, such as a view of a full half of a soccer pitch, tended to reduce the players to “matchstick figures”. In certain close-ups, however, 3D clearly offered a benefit, allowing viewers to appreciate the positioning of players more accurately than in 2D. Edwards called for the beginning of mass production of 3D cameras, rather than the current range of custom-produced two-camera rigs, and that they should be much smaller than present designs. No doubt we will see some examples of early “integrated” 3D cameras here at the NAB Show, with Panasonic for one expected to announce its first model. Register for Strategy Analytics' Analyst Breakfast at the NAB Show Client Reading: Global Audiovisual Market Forecast

Cisco built up yesterday’s big news announcement as something “that will forever change the Internet and its impact on consumers, businesses and governments”. The chances are slim that more than a tiny fraction of consumers, businesses and governments will ever actually encounter the catalyst for this revolution, namely the new CRS-3 router, which will help service providers deliver the vast quantities of video that people will expect to consume over the internet in the coming years. So in that sense, the announcement was a slight disappointment, if none the less significant. Shortly beforehand, the news arrived that Cisco had also became a strategic investor in SiBeam, Inc. Also currently unknown to most consumers, perhaps, but SiBeam’s wireless video technology could become ubiquitous over the coming decade. We’ve covered it many times, most recently here. For some years SiBeam has been in a race with various other technology developers, and primarily Amimon, to bring wireless distribution of high-definition video to the digital home. While early consumer products have reached the market in limited numbers using both SiBeam and Amimon solutions, sales performance has been restricted by high prices. We are also hearing that Amimon’s technology has not proved as reliable as it needs to be, and as we predicted before, we believe the momentum is in the direction of WirelessHD, if there is indeed going to be a single de facto standard. Cisco joins other major consumer technology investors Samsung, Panasonic and others in backing the WirelessHD 60 GHz technology. So as well as investing in the future of internet video distribution, Cisco is counting on tomorrow’s in-home video networking technologies to build its vision of a world of networked video. David Mercer Client Reading: Wireless High Definition Appearing Soon at a Home Cinema Near You

The rapid re-emergence of 3D in the television and video industries is beginning to reach “real” consumers. I was tempted into the Sony Style store in Boston’s Copley Mall recently by a window poster offering the chance to “see 3D in action”. After circling the store with no sign of said “3D in action”, a sales consultant pointed me, with slight embarrassment, to a PS3 connected to an LCD TV. “This should be showing 3D, but we were sent the wrong box.” Further inquiry revealed that “Singapore”, whatever might be there, had shipped a faulty hard disk drive for installation in the PS3, and the store was awaiting a new module, presumably along with the sort of firmware upgrade to be offered to all PS3 owners later this year to enable 3D Blu-ray playback. Personally I have seen enough 3D demos to last a lifetime, so this disappointment represented no great loss. But Sony will clearly have to avoid such problems for US-based customers interested in 3D Blu-ray players and TVs once they are offered for sale. Effective in-store technology demonstrations have always been one of the major obstacles to commercial success, and 3D will be no different. Minor issues such as these will be overcome as the technology matures, but they will be replaced by other practical questions such as how 3D glasses are stored, demonstrated and secured. Retailers will have other headaches too, as an excellent article in specialist trade publication, CE Daily, revealed last week. The incompatibility of passive (side-by-side) and active (eg Blu-ray) 3D systems is one of the major faultlines in the realm of 3D standards. The Blu-ray 3D standard specifies only the active approach, which is generally accepted to offer the best quality available today, and will be compatible with TVs with active displays and the transmitter necessary to communicate with active shutter 3D glasses. Panasonic recently became one of the first major companies to announce sales of new, active 3D TVs. It will sell 50” and 54” plasma sets in Japan, starting at around $4800. One pair of glasses will be included in the bundle; additional pairs will retail at around $112 each. But, as CE Daily’s Barry Fox reports, it seems, as long suspected, that some TVs will be launched which will only support passive 3D technologies, from vendors such as Hyundai and JVC. These TVs, which are likely to cost considerably less than the first active 3D sets, will be suitable for broadcast 3D services from Sky, which are only using the passive approach. But they will apparently not be compatible with 3D Blu-ray players (including the PS3), at least not without some modification or add-on transmitter device. They will also apparently not incorporate the latest HDMI 1.4 ports required for 3D Blu-ray and other potential active 3D systems. We wrote nearly a year ago that BSkyB, which had just announced its intention to launch a 3D service, was unconcerned by 3D standards issues. But that narrow perspective ignored the dilemma which now apparently faces retailers anxious to push sales of new 3D devices and software. Sky’s 3D customers will need new TV sets; but will retailers tell them (will they even know) that some of those TVs may not play 3D from Blu-ray discs? Buyer, as always, beware. Client Reading: Consumer Imperatives for Digital TV Media Browsers

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

The depth of the recession in the US consumer electronics market was highlighted today by CEA data which confirmed a decline in dollar revenues in 2009 of 12%. The outlook for 2010 improves but only in the sense that the rate of decline falls to 3%. In the meantime we're hearing news of new 3D TV channels already, with both ESPN and Discovery throwing their hats into the ring. This is great, if expected, news for the many 3D-ready TVs we expect to see over the next few days. At this evening's CES Unveiled event Sensio were showing their passive 3DTV, even though the company today announced its partnership with Visio to launch an active 3DTV later this year. Mitsubishi was also showing its laser 3DTV with the adaptor which will be necessary for compatibility with Blu-ray 3D players when they are lauinched. Logitech was showing its new Lapdesk N700, a laptop “cushion” with in-built speakers designed for enhanced laptop usage in the comfort of the armchair. The peripheral retails at $89.99 and also features an in-built cooling fan to prevent over-hearing, a familiar problem for those many TV viewers who now sit with a laptop on their knees. Logitech have thoughtfully added a grip to help keep the laptop steady, but unfortunately in my case it failed to prevent the Macpro falling to the floor. No damage done, luckily, but perhaps evidence of a need for further improvement in design. Logitech was also demonstrating the fruits of its recently closed acquisition of Lifesize Communications, a videoconferencing specialist. On display was its Passport set-top videoconferencing device. This retails at $2500 and allows anyone with a minimum 2-way 1Mbps broadband connection to communicate using HD video (720p). The service downscales to lower resolutions for slower bandwidth connections. Logitech claims that this device is a third of the price of any other similar product on the market. That may be true today but is unlikely to remain so for much longer. Videoconferencing and telepresence are shaping up to be one of the emerging trends of this CES and we will hear a lot more over the next few days, in addition to the Skype/Panasonic/LG announcement today. Yet another OTT video set-top box was being demonstrated by Syabas with its Popbox product. This grew out of the company’s Popcorn Hour device. The Popbox has been designed to be especially user-friendly, and the user interface does appear attractive and accessible. The service integrates currently 20 “content application channels”, which means things like Netflix, and is working with 200 application developers. It will launch in March 2010 and retail at $129, plus $20 for the optional WiFi module. The Popbox is 1080p-capable, although the only 1080p content was demonstration material. If Syabas manages to sign 1080p deals with content providers it will certainly be a step ahead of most competitors. ProVision CEO Steve Cliffe was confident enough in his company’s wireless HD technology to carry a laptop across the show floor while it streamed 1080i HD content, and there was no loss or deterioration in signal. This UK firm was founded by professors at Bristol University, and uses proprietary error correction and RF management techniques to improve HD video streaming over 802.11n. The company is talking to set-top box and TV manufacturers looking to support HD distribution to multiple home devices. Another UK firm, Imagination Technologies, was launching its Pure digital radio products for the US market. Pure is the leader in the UK but virtually unknown overseas. It will, rightly, tread carefully as it enters the notoriously challenging US market, and will obviously (since the standard is not used) drop DAB from its US product line-up, instead concentrating purely (sorry) on internet radio. Its Sensia product is the highlight of the range and features a full-colour touch screen LCD display as well as additional interactive capabilities like Twitter and Facebook. Pure confirmed to us that video-capable devices are a natural step forward and can be expected in the next year or so. Client Reading: HDTV: Standards Muddle Clouds Outlook For Wireless Displays

I’ve spent the day with Panasonic’s European marketing team and other analysts discussing the future of 3D. The debate ranged from technical issues such as passive v. active and full v. half HD, content production challenges, and marketing in-home 3D products to consumers. Panasonic is a leading light in the drive to develop a 3D home video standard based on Blu-ray Disc technology. While nothing can yet be publicly announced it seems as though things are progressing well and that announcements should be expected in the not-too-distant future. We were also given demonstrations of 3D content from a specially adapted BD player, on a Panasonic 103” plasma using active glasses. I had seen much of this content before, although some new clips confirmed the system’s potential. Once again the Olympics material was most impressive, although Panasonic did not use some of the best clips I had previously seen. The discussion of content production led to a debate around intraocular distance as a key determinant in viewer satisfaction at the 3D experience. It was suggested that since many of the now-familiar 3D movies have been targeted at the children’s market, that the 3D aspect of the movie has been tailored towards the smaller distance between children’s eyes rather than those of adults, and that this is one explanation why adults may see a less satisfactory 3D effect than children. If this is indeed the case, it would seem to be another barrier that the emerging 3D market will have to overcome, if certain pieces of content can only be viewed satisfactorily by certain age groups, or, more precisely, those with particular interocular characteristics. Much of the discussion centered on competition between emerging 3D providers, not least broadcasters like BSkyB, which recently announced its intention to launch 3D content in 2010. There will inevitably by differences in the technology strategies across these different platforms, and the challenge for all players is to minimise the potential confusion which results. This will be particularly vital in the area of 3D-ready TVs. As I indicated previously, such products have not really begun to reach the European markets yet, unlike in the US. But when they do (expect European marketing to start in earnest in 2010) communication to consumers will have to be crystal-clear on which 3D content will play successfully on which 3D-ready TVs. Sky will surely be pushing its own “standard” and labelling, and that is likely to encourage others to tell their own stories. As I announced before, Sky does not care about any 3D standards debate. I’m not pessimistic about 3D in general. It will certainly penetrate home markets (TV, video, games) in various ways over the coming years. But the danger, as always, is that the opportunity will not be maximised if industry players focus on their own narrow interests rather than communicating clear, consistent messages to consumers. Twitter: twitter.com/DavidMercer_SA Client Reading: Digital Media Devices Global Market Report

Cisco today announced its intention today to acquire Pure Digital Technologies, the makers of Flip Video camcorders, for more than $600m. Pure has sold more than two million Flip devices since their launch. They had sold a million nearly a year ago so that gives some idea of the run rate. Flip launched in Europe last year, but we get the feeling sales have not taken off as much as in the US. There has been much hoopla around the fact that Flip has become a leading “camcorder” brand in no time. But in reality the company has created a new category distinct from the tape, disc or HDD-based devices that have traditionally dominated. The main market driver historically has been to offer the best possible video quality, and the best consumer camcorders now come pretty close to professional quality video capture. Pure Digital took another approach – it wanted to simplify the capture and sharing of user-generated video for the net generation, and its portability, fast boot-up, one-button recording, simple USB connection and automatic loading PC software were hits with people who would normally baulk at the complexity of traditional camcorder devices. I’ve been using a Flip device for the past nine months, and there is no question it is an easier decision to carry one of these than my albeit excellent Panasonic DVC device, as long as I’m not expecting to create high quality video. In fact, it’s been successfully used by children with virtually no training, as well as by technophobe adults of my acquaintance. Cisco’s Chris Dobrec told us the background to the deal: he was at a daughter’s school sports event and saw many parents capturing the action on their Flip devices. They seemed so cool he suggested Cisco buy the company. Observers are already questioning the $600m valuation, and understandably if annual sales of a million or so devices at $150 are the benchmark. But Cisco is more interested in the device usability and software sharing capabilities that Pure has developed, as well as the fact that Pure takes Cisco further into the video market, which is a strategic objective. We can expect to see those capabilities to be improved on and integrated into Cisco’s emerging consumer device and software portfolio, with its Media Hub at the centre. While we expect Cisco also to add improved connectivity, such as WiFi, to the devices, the wider strategic question is the size of the market opportunity for personal, single-function devices such as digital still cameras and camcorders, when mobile phones are increasingly sophisticated in those applications. How many different devices can we expect users to carry? For now, Pure has unique benefits for certain segments: other vendors are sure to match it before long. Twitter: twitter.com/DavidMercer_SA Client Reading: Digital Media Predictions for 2009

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

Last year we questioned whether the CES wow factor would make a return. Perhaps it is going too far to say the 2009 event fulfilled those wishes, but I got the sense that, in spite of the gloomy economic background, there was greater depth and commercial potential to the innovations than in recent years. And again perhaps it is reading too much into what inevitably are subjective impressions, but it may have been the challenging economy that encouraged exhibitors to demonstrate their readiness to benefit from the next technology transitions when the upturn finally appears. Of course there was nothing really new, and it would be wrong to go to CES or any other event with excessive expectations. Most innovations are evolutions or enhancements of existing technologies. The key is to look for genuine progress towards significant commercial opportunities, and this was clearly evident in connected TV, 3D and portable devices. While previous shows have seen a degree of experimentation in internet and web-enabled TV, this year there was a sense that widespread commercial rollouts are finally imminent. There is certainly no consistency in the approach to web TV, and, as we have seen, early implementations may be missing the real driver of consumer demand. But at least the products will be out there on retailer shelves, and vendors can start to learn what works and what doesn’t. 3D is at an even earlier stage in its lifecycle, although some would argue that its gestation began several decades ago. With so many false dawns behind it, 3D scepticism is understandable. But doubts over user acceptance should not cloud the fact that technical implementations are clearly improving year after year. The very best, such as Nvidia’s 3D gaming demonstrations, are very impressive indeed and well suited to their applications. Others, such as Panasonic’s 3D Blu-ray, can be extraordinarily good when the content production chain has been well designed, but are weaker with legacy material. As we move through the next decade 3D will certainly be playing an increasing role in some form or other in the digital home. The other broad trend is the increasing power of portable and mobile devices. Our research is tracking the role of personal technologies in bringing Internet applications to the digital home. As truly portable computing becomes ever more powerful, as evidenced by Nvidia’s new ION motherboard, growing numbers of consumers will see such devices as their primary digital home content gateway, connecting ad hoc to the large TV screen as required. These trends, while they will have near-term commercial impact, will also drive major new revenue streams for technology vendors and content providers alike over the coming decade. For that reason CES 2009 fulfilled its purpose to provide a vision of the future of consumer technology. The fact that fewer people – 110,000 attendees is the latest estimate – were there to see it is a sure sign that the industry is in the midst of a downturn, but it should not divert us from the fact that new technologies will inevitably replace old ones, fuelling new growth opportunities as soon as the economy allows. Twitter: www.twitter.com/dmercer15 Client Reading: Digital Media Devices Global Market Report