Wednesday, May 24, 2006

The Tivo Trojan Horse

The key to business success in the 21st Century is flexibility.

For a while, Tivo looked like it was going to be victim of the changing business environment. Just as the word "Tivo" was becoming generic, a la Kleenex and Xerox, the business was in danger of becoming extinct. Users seemed to love the functionality, but competitors figured out that Tivo was nothing more than a video-enabled hard drive, a model that was easily copied.

Cable MSOs, and particularly Tivo's "partner" DirectTV, realized that they could build DVRs - the new generic term - into their set-top boxes. Tivo looked like it was going to go the way of its former direct competitor Replay, which sank without a trace.

Now Tivo is trying to deliver proprietary content and functionality - downloading programming and becoming a bridge between the internet and the TV. If they can do that successfully, Tivo becomes more than just another box sitting in your TV console; it becomes THE BOX through which you receive all your non-linear programming. Of course, it still has to contend with the other boxes - Akimbo, Moviebeam, etc. - that are trying to make the same leap.

This battle is going to get ugly, and all I can say for sure is that not everyone will survive.

Monday, May 08, 2006

The Report from NAB 2006

The presentations at NAB2006 focused on the migrating of content to on-demand platforms, both television and web. There were three basic themes, intentional and otherwise:

I. The pace of technology change is accelerating, and the shift to on-demand is becoming more inevitable with every passing moment.
II. With regard to the attendees – TV and radio broadcasters – there was surprisingly little advice or direction as to how to cope with these developments.
III. There is still tremendous confusion as to how these developments will manifest themselves, with competing interests and therefore competing visions that will soon be joined in mortal combat.

The overall intention of MediaScrum is to pull all of this together and make sense out of the pieces, which seem to be increasing in number. For the discussion of NAB2006 and other purposes, let’s stipulate the following definitions:

IPTV – TV programming delivered via Internet protocol by the telcos to the TV in your home. Despite unique features enabled by IP, e.g., call waiting and multiple picture-in-picture screens, it is essentially digital cable/satellite TV on steroids. It is a closed-system, and programming is controlled by the telcos.
Internet TV – TV programming delivered over the public Internet and viewed on your PC. This includes all forms of online video, whether repurposed network programming or user-generated video on YouTube. I prefer to think of Internet TV as entertainment or news viewed on the PC as a substitute for watching similar programming on your TV. The fundamental consumer constraints are that you have to be sitting at your PC and view it through a browser.

This will all eventually merge. All programming will be digital and stored on a home video server – whether from the cable company or telco, whether downloaded from the internet or ingested from a DVD. The server will provide the video as you want it – to your TV to watch “Lost,” to your PC to watch news, to your cellphone to watch music videos while taking a walk, to your laptop to watch “Mission: Impossible III” on the airplane. Your content, when you want, where you want, how you want. This is Future 1.0.

Future 2.0 would provide all the content stored on central servers, not locally in the home. I could access any content from anywhere on any device at any time. This will take a long way to come about because it requires all of the content providers and distributors to have common protocols, business models, and revenue sharing. Maybe when I come back in my next life.

So, how did NAB2006 reflect the coming of Future 1.0?

IPTV was probably the most mainstream of the visions discussed. Microsoft’s view is that TV is where the PC was in the 1980s before the advent of the Internet. With the advent of IPTV, TV has now become a full-class citizen in the digital age.

By 2009, IPTV penetration is estimated to grow to 20-30 million households worldwide. During this time, Microsoft expects that IPTV will dominate over Internet TV due to:

> Quality of the service, especially compared to Internet TV
> Structure, with $10 billion of capital expected to be invested
> Economic value to consumers, and consequently to all players in the value chain.

That is probably true, at least in the near to medium term.

AT&T discussed its approach to IPTV, which is taking the cable strategy one-step beyond. In another session, Cablevision talked about how it had pioneered the Triple Play – voice, TV and data. AT&T’s strategy is increased functionality within the bundle that will also enable interactions among the services: VDSL, fiber, wireless, wi-fi, home networking, IPTV.

AT&T is holding to their projection of initial deployment to 18 million households, with fiber to the premises or to the node, such that on average, fiber will be extended to within 3000 feet from the home, allowing speeds of 20-25 Mbps.

AT&T’s offering will provide:

> More than 200 channels
> Hundred of hours of VOD
> Multiple PIP with metadata of observed channels
> An interactive electronic program guide
> Search engine – actor / title / director / etc.

AT&T has placed a huge bet that its vision of the future is correct. Not all players are pinning their business plans on a particular view of the future but some are making similar bet-the-ranch, we’d-better-get-it-right-or else bets. For example, Intel kicked off the conference with its view of the digital home that is premised on it dominating the world of Future 1.0, which is less TV-centric.

Intel’s presentation set the stage with a discussion of the future impact of digital entertainment that was echoed by many, if not all, of the presenters who followed:

> Content business models change
> Media moves to multiple digital platforms
> Distribution model moves away from cable and satellite companies
> Portals are the next MSO as internet broadcasters and aggregators
> Consumers get more control

Now, Intel’s not-so-hidden agenda is that it wants the VIIV system to dominate the digital home just as the Centrino system has come to dominate wireless communications in laptops. The VIIV-enabled device is meant to connect the internet and the PC to the TV. Running Microsoft’s MediaCenter software, VIIV will power the home network.

Intel’s ambitions for VIIV run far beyond those that it had for Centrino. Where the latter needed the cooperation of laptop manufacturers and wireless providers, the “VIIV ecosystem,” as they put it, will involve:

> PC manufacturers;
> Consumer electronics manufacturers who will make the connected media devices – TVs, stereos, etc.; and
> Content partners

Distribution companies will presumably also be part of the mix.

Of course, you can start to see the outlines of the implications of the disaggregation of content and distribution. Cable and satellite companies become less important. What about television networks? Do they still have a role?

NBCUniversal hit it right on the head when it discussed expected changes in business models and partners:

> Business model challenge – NBC doesn’t want to replace a big business with a small business, and
> It wants change with minimal disruptions

Unfortunately for NBC, neither of those areas is under its control. The timing, direction and impact of change will happen with or without NBC’s cooperation.

New distribution models are evolving. For example, Moviebeam views itself as a “video store in a box” since:

> Its system distributes 10 fresh movies per week through datacasting, 100 movies total stored on hard drive;
> Movies can then be rented off the hard drive;
> Moviebeam will be introducing an IP connection into box to enable access to older titles that presumably will initially be trickled into the box during off hours; and
> The Moviebeam box will have a USB antenna to transmit content to other platforms in the house.

Interestingly, this model not only challenges NBC as being the distributor into the home, it potentially challenges Intel with regard to managing the content within the home. Once broadband enables instant downloads, Moviebeam’s business model of storing content locally could disappear, but if it has established itself as the de facto home entertainment server, it could maintain its hoped-for place of prominence in the home.

Let’s move over to Internet TV: video content on your PC. One name getting a lot of attention in this area is Brightcove. According to Jeremy Allaire, the potential benefits of Internet TV are:

> Open distribution, so anyone can create web content;
> Consumer choice that is as deep as the text web;
> Multiscreen delivery; and
> Content owner control.

Their business model seems to be predicated on enabling content owners of all stripes to port their content to the Web – traditional content providers such as Discovery Channel and amateurs like you and me – a scary prospect if there ever was one.

Since the heavy hand of government will be involved however the video world develops, three FCC commissioners were on hand to provide their views: Michael Copps, Jonathan Adelstein, and Sheila Tate. Given that it was a public forum, they didn’t have much to say that was controversial, but did provide some general direction and guidance with regard to their priorities.

Their general concerns regarding media were:

> Homeland security – the communications industry is unprepared for a natural disaster or a terrorist attack;
> Media consolidation; and
> The transition to digital TV

Commissioner Tate commented on her view of the FCC’s role in the telco IPTV world, saying that the FCC is taking a watchful approach for now as they consider the issues as to whether they should actively bring about a level playing field. In general, she felt that the role of the FCC was to encourage competition and investment.


In general, the world is moving toward on-demand content, but on separate platforms: closed networks such at IPTV and broadband video on the web. Their eventual convergence depends on linkage from PC to TV, with Intel trying to take control on the hardware side with VIIV.

There was very little discussion – at least in the public sessions – about how broadcasters, i.e., TV stations, should deal with this phenomenon. For example, there was no discussion about recent NBC or Fox deals in which the networks are trying to placate station affiliates concerned about content moving to the web, encouraging viewers to look elsewhere for network shows. The question left open is: What is the role of TV stations when content is on-demand?

On the other hand, as we move to on-demand content, there was also no discussion about difficulty of building new entertainment brands if all content is on-demand – will people rely on old brands, word-of-mouth, trusted sources? Even if consumers know what content that want to watch and have more choice, how do they navigate? In many ways, video on the web is like the Internet before search – how do you find what you want to watch?

Finally, there was little discussion of the practical technical hurdles. For example, Mike Shaw of ABC said earlier in April that the web infrastructure of the U.S. can only support about 400,000 simultaneous video streams. Not much of a mass audience there. Other little items that were mentioned only in passing: does there need to be reformatting of content for different devices and modalities – can content be published once and viewed many times, can it just be ported automatically from one device to another or does it need to be reformatted for aspect ratio, speed of streams, video format, etc. – some of which can probably be automated and some which probably can’t.

The road to Future 1.0 is still a long and bumpy one, so let’s all hang on!