Digital Consumer

At the Westminster eForum’s Digital TV seminar today, I spoke on a panel discussing HDTV on the DTT platform. I was lucky enough to be drawn ahead of Dermot Nolan, the recently appointed Director General of the Digital TV Group, otherwise there would have been little else to say. Dermot is not known for holding back with his forthright views, and he did a good job of pulling apart Ofcom’s proposals for HDTV on the DTT platform. You can read the DTG’s analysis here.

My own presentation put the HD-DTT debate into the context of HDTV and HD video across multiple platforms (disc, satellite, internet), which have been discussed frequently in this blog, as well as commenting briefly on the international rollout of HDTV. I also referred to the French decision to mandate HD tuners in HDTVs. Not surprisingly, this seems to be the sort of direction the DTG would like to see from the UK government.

I have no doubt Dermot will do everything possible to make the DTG’s case against Ofcom’s proposals, but I fear the efforts may be in vain. As we predicted last year, Ofcom was always unlikely to ringfence additional spectrum for HD-DTT, and while its proposals to use emerging technologies (MPEG4, DVB-T2) to expand the capacity of the DTT system invite predictable scepticism over timing, reliability and manufacturer support, they appear to represent a reasonable compromise all things considered. The last thing manufacturers need is years or even months more arguing between the various parties. Decisions need to be made quickly if DTT is not to get left behind in the race to HDTV.

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HDTV and DTT: The Impact Of Platform Evolution Decisions On HDTV Adoption Scenarios

Today in London the Westminster eForum held a seminar assessing the progress of the switchover from analogue to digital terrestrial television and the issues arising from the availability of released spectrum, the so-called Digital Dividend.

I was particularly interested in comments from Ford Ennals, who has been Chief Executive of Digital UK for the past three years and is shortly to step down from this role. Ford gave us a brief insight into lessons learned from the UK’s first stage of digital switchover, which took place in Whitehaven in November last year.

Much of the discussion at the seminar focused inevitably on DTT, but I was particularly interested in the impact of analogue switch-off in Whitehaven on digital satellite TV (DSTV). Whitehaven never had DTT until 2007, and only four terrestrial analogue channels and no cable service, so ownership of DSTV was already high - somewhere near 70% of homes. But during the whole switchover process, 40% of analogue viewers chose to install satellite instead of DTT. Most interesting, according to Ennals, the “vast majority” chose to pay for one of Sky’s packages, where they clearly had not been paying for TV previously. Sky also benefited from a rapid rise in adoption of Sky+, its PVR service.

Jamie Reed, the local Member of Parliament, confirmed that Sky had run a “very aggressive campaign” during the run-up to switchover, in fact too aggressive at one point as it was forced by the Advertising Standards Authority to withdraw one of its claims.

At first sight this would appear to be a lucrative opportunity for Sky as the entire UK switches off analogue TV over the next four years. Whitehaven was a relatively unusual example where DTT was not previously available and DSTV penetration already very high. Nevertheless it confirms our previous analysis that the analogue terrestrial switchoff is likely to benefit Sky, cable (where available) and even IPTV providers, as well as the Freeview DTT platform.

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HDTV and DTT: The Impact Of Platform Evolution Decisions On HDTV Adoption Scenarios

It’s the classic business dilemma: where do you go when you’re number one? And in the case of Nokia, which has dominated the global mobile phone market for nearly a decade, that challenge has seemed greater than ever. Nokia’s market share has never dipped below 30% since 2000, and in a market which has now reached an astonishing 1.12 billion phones sold every year this is an extraordinary achievement. Indeed, so successful has Nokia’s strategy been that it has been increasing its share steadily and finally broke through the 40% barrier during Q4 last year.

The “Nokia era” of mobile phone dominance has been mirrored by a number of other consumer technology markets in the past. Sony famously dominated the “Walkman” business throughout the 1980s, having created the original design for headset audio by bundling a portable audiocassette player with a pair of lightweight headphones. It’s difficult to believe it now, when thumbnail MP3 players carry entire music collections, but that was a cool device just 20 years ago, and if you didn’t own a Sony, you made sure to hide the brand. Sony managed to convert some of that loyalty to the CD format, but was gradually losing its grip and eventually missed the boat completely on digital music and today’s iPod era.

The consumer technology industry is littered with famous old brands that lost their way. RCA was the de facto TV brand leader in the US for years but has long slipped into the sub 5% bracket and is now under Chinese ownership. Japan’s JVC created the VHS standard and thrived during the VCR era, but was unable to build on this success and inevitably fell on hard times.

So will the same fate eventually befall Nokia? In historic terms, to dominate a market over a period of several years is not so unusual. The longer term challenge is to maintain sufficient flexibility to react to market evolution. Nokia will no doubt continue to lead in “mobile phones” for some time, but it must never take its eye off the wider technology market in case a new competitor comes along with something that may not look like a phone, but which begins to win Nokia’s phone customers. The iPhone is the obvious current example of blind side evolution that could eventually change the competitive environment. Nokia must make sure that it comes up with the answer to “what will mobile phones become?”, otherwise that 40% share could look very different in a few years’ time.

Nokia Reaches 40% Share as 332 Million Cellphones Ship Worldwide in Q4 2007

As promised, on Monday night Mitsubishi announced its new TV technology to great fanfare and accompanied by a very loud soundtrack. It was presented in a rear projection 50″ configuration, and incorporates a Real-D 3D processor so that viewers with the appropriate glasses see a 3-D effect. This was quite impressive relative to other 3D approaches we have seen, although we still have reservations that many viewers will be happy with wearing glasses.

Video quality seemed impressive, and Mitsubishi claims that the laser TV reproduces nearly twice the colour gamut as the best LCDs available today. However, market trends suggest that, however good the picture, demand for TVs that is likely to remain in decline. Mitsubishi is trying to position the product as a new category to de-emphasise the competition, but few customers will be fooled. Laser will help Mitsubishi sustain its market share in a decling segment, but it is unlikely to do more that stall the long-term decline in rear-projection formats.

Digital Home Entertainment Devices: Global Market Forecast Q407

We spent some time yesterday with Hillcrest Labs’s Andy Addis. Hillcrest has been working on improving the TV control experience since the beginning of the decade. The company’s founding principle is that navigation through a world of effectively unlimited television and video content cannot function effectively with the classic remote control/electronic programme guide model. It believes that television interfaces will eventually move towards a pointer-based system. A key challenge was to create a pointing device that works effectively in the standard TV lean-back, 10-ft scenario, where a firm, flat surface is typically unavailable. This led to the “air mouse” concept that is available through Logitech and is the company’s first commercial product.

It has also now been extended into the “loop” television control device concept. TV viewers have become used to sitting back on the sofa and controlling channel selection and, more recently, interactive features, over the past 30 years or so. It is worth recalling just what impact the wireless remote control had on TV viewing and usage when it began to penetrate the TV market in the 1970s and 80s. Most people have forgotten the time (if they ever experienced it) when changing channels meant getting up out of the seat and flicking switches on the TV. It’s no wonder that TV channels of that era concentrated on winning eyeballs early in the evening with their best programming, safe in the knowledge that many viewers would stay with whatever shows followed on the same channel, not to say the advertising that funded them. Once viewers were able to control what was on the screen more easily, viewing habits began to change beyond recognition, and channel surfing became the norm.

On-screen programme guides have helped viewers cope with the digital era, when hundreds of channels are available. But there’s no question that they are being pushed to their limits by the traditional remote control/EPG combination. Navigating through Sky Digital’s endless channels is a time-consuming and frustrating process. It’s no wonder most viewers spend most time with the channels they know best.

Hillcrest’s approach combines the principle of pointing at the screen with a highly visual presentation approach. In demonstrations, the viewer can move the cursor around the screen very rapidly. On-demand movies begin with a wide selection of titles, presented as though they were DVD covers. The details on each title are barely legible at the top level of the menu but they are grouped into genres, and the viewer can easily zoom in to each genre or a specific title that may be of interest.

The CES demonstration was shown on a PC as well as a set-top box based on a Sigma Design chipset. On the PC, navigation is very rapid. It slows down somewhat on the set-top box, but is still faster than most of today’s commercial digital TV platforms. The navigation experience is as close to selecting DVDs in a video rental store as I have seen. Hillcrest has integrated most of the usual “digital home” options into its reference guide, including TV channels, music libraries, games and photos.

“The Loop” control takes some getting used to, but is easily learnt. There are two buttons, select and back, and sensors and proprietary algorithms mean that the pointer works whatever angle the control is held at.

Hillcrest is working with CE manufacturers with a view to licensing its technologies. It has also had interest from digital TV service providers. The company is encouraged by the rapid success of Nintendo’s Wii, which appears to confirm that games players are willing to embrace new control concepts. Persuading several billion TV remote control users to overcome the inevitable inertia and switch to a new concept may take rather longer, so we will look for commercial deals with major CE players and service provider industries for evidence that the lean-back audience is ready for another radical change to their viewing habits.

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Digital Home Entertainment Devices: Global Market Forecast Q407

I raised my concerns over potential conflicts in Cisco’s consumer strategy a few weeks ago. This week I had the opportunity to raise them directly with John Chambers during an analyst round table here at CES. Most of the hour’s discussion centered in one way or another on the question of the changing role of service providers in the residential space, the challenges they face, and how Cisco is helping them evolve and compete.

Chambers confirmed that his company planned to move into consumer markets “aggressively”, so we should expect a lot more activity from the Linksys and Scientific Atlanta teams in the coming months. The answer to the question, “which do you choose - service providers or media companies?” is, perhaps inevitably, “both”. Cisco plans to remain completely neutral, support open technologies, and ultimately let the market decide.

This seems to be an entirely logical position - perhaps too logical. Time will tell whether Cisco’s current service provider customers are happy that the company supports its emerging competitors. And, if they are not happy, whether there is even anything they can do about it… Let’s face it, Switzerland doesn’t appear to have suffered too much from being everybody’s friend.

Client Reading:
Digital Disruption: Imminent and Long Term Threats to the Audiovisual Industry
Online HD: Disney’s ABC Throws Down Gauntlet To Competitors, and Access Providers

Microsoft and BT have confirmed widespread and longstanding rumours that they will enable Xbox 360 owners in the UK to access BT Vision through the console. Details on pricing have not been announced but the service is expected to be rolled out “in the middle of 2008″. It will be available to existing BT broadband customers who own Xbox 360s as well as any new device owners.

We spoke with Dan Marks, CEO BT Vision, and Enrique Rodriguez, corporate vice president of the Connected Television Division at Microsoft, during CES. The companies are clear to present this deal as a partnership of equals, and it is certainly further confirmation of how BT continues to innovate around connected home services.

But it is also a good example of how the shifting sands in digital media are creating opportunities, certainly, but also potential conflicts between companies that may previously have been partners. In fact, Microsoft’s Robbie Bach, who heads up the company’s Entertainment and Devices activities, more or less confirmed that the Xbox 360 provides competition to cable and satellite companies with his observation that it already offers, through the Xbox Live service, more on-demand video than these traditional service providers.

That comment applied to the US market, and video downloads through Xbox Live have only recently been introduced elsewhere. What seems to be happening is that the Xbox video strategy is being tailored to the competitive environment in different parts of the world. BT has been one of the leading partners of Microsoft’s Mediaroom (formerly MicrosoftTV) IPTV platform, and Microsoft appears, for the moment at least, to be content to have BT as a major partner to push its Xbox 360 video capabilities. Our understanding is that the BT Vision video on demand service will appear as a distinct “portal” on the Xbox Live menu, although no demonstrations of the commercial product have yet been seen.

Microsoft also expects to roll out its own video on demand offer through Xbox Live (in the UK), so at first sight it might appear that it could be competing with BT for VOD customers. Much will depend on what video is actually made available on each service, and which content partnerships are formed. As long as the Microsoft/BT partnership remains in good shape, they will manage things to minimise potential conflicts.

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Global IPTV Forecast: Homes, Users and Subscribers

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.

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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.

There have been widespread reports over the holiday period of problems with Microsoft’s Xbox Live service, and Larry Hryb, Director of Programming, has confirmed this in his own blog. Problems have included inability to sign in, recover accounts, and matchmaking. I have been experiencing the latter problem until yesterday (in spite of Microsoft’s claims that the service is now up and running), but it’s good in some ways to know at least this is a widespread issue and not a problem with my own console.

For those not up to speed on console gaming, matchmaking is the process by which the Xbox Live service brings together different players into an online game using the in-built broadband connection. From my own experience, based on Microsoft Games Studios’ Project Gotham Racing 4 , this is normally a pretty efficient process. I have to admit also that it is thoroughly compelling, if initially rather spooky, to race in real time against multiple opponents, usually located in other countries, sometimes on the other side of the world (real world time zones seem to matter less to hard core gamers). It can also be fairly disillusioning when your car seems to spend more time acquainting itself with crash barriers while everyone else whizzes past. But there really is nothing like playing live, knowing that pause or restart are not an option. And the experience confirms, if there was ever any doubt, that computer generated opponents, however sophisticated the programming, can never behave as unpredictably as human beings.

Microsoft has not admitted to the nature of the problem it has been facing, although it is not entirely reassuring to hear that the service was “never completely offline”. So how near to completely offline was it, exactly?

The problems were likely caused by a surge in demand over the holiday period as more regular online users spent more time playing, occasional users joined them in greater numbers, and new users plugged in their freshly unwrapped consoles for the first time. It is easy to criticise Microsoft for not successfully coping with the demand, but it would be extremely difficult to accurately predict how much capacity would be needed in what is still very much an emerging market.

Microsoft’s real problem is that it, unlike Sony, asks users to pay an annual fee for its live gaming service, which implies a certain level of service and responsibility. That difference in customer relationship may also mean that user expectations are different. If the PS3 service goes down, users may be unhappy but there is no subscription to cancel. Microsoft on the other hand is already facing calls for refunds of part of that subscription fee. That’s not a nice situation for any company to be in, but it’s an inevitable part of the growing pains of emerging broadband service providers that deploy a subscription-based business model.

Client Reading:
Content Delivery Networks: Catalysts Of The Digital Media Revolution
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