HDTV Almanac

Last week, electronics giant Canon lost a big court decision to a little Texas company, Nano Proprietary. Nano Proprietary holds patents on some of the technology necessary to develop the new surface emitter displays: SEDs. According to a Reuters report, Canon paid Nano a one-time $5.6 million licensing fee for the use of those patents. Then Canon teamed up with Toshiba to develop SED technology jointly, and created some beautiful displays that attracted drooling mobs at trade shows including CES.

Nano complained that the license agreement was only with Canon, and that Canon did not have the right to share the technology with Toshiba. Last week, the court ruled in Nano’s favor, which means the termination of the existing license agreement. If Canon wants to continue to develop SED, it must negotiate a new deal with Nano for the use of those patents.

While the demonstrators looked awesome — an image like a CRT with the crisp detail and thin panel of an LCD — the technology has been a long shot from the start. The question has been whether or not it can be manufactured at a price that can compete with the plummeting LCD prices. Recently, a Canon representative said that while there were plans to go into production, the product would be positioned as a high-end premium product intended largely for professional applications such as television studios.

The loss of the court case is certainly not the death knell for SED. Nano Proprietary cannot want to kill the project; the company just wants more money from the deal. The problem is that any new deal will increase the costs, and that will make worse an economic situation that already is in trouble.

The bottom line is that I expect work on SEDs to continue, but that it is now even less likely than ever that the displays will ever come to market. And if they do go into production, I expect that they will be too costly to compete, and will be limited to niche applications.

At a press conference yesterday, Sony announced plans to release an entry-level Blu-ray high-definition DVD player with a $599 list price early this summer. A senior VP also predicted that a Blu-ray player will be selling for less than $500 for this year’s winter holiday buying season, according to a variety of sources. Sony also cited data from Nielsen VideoScan data that Blu-ray DVDs are outselling HD DVD discs three to one.

I’m going to stand pat on my prediction that HD DVD will be the winner in this horserace. Toshiba already offers an HD DVD player for $499, and it has been out for a while. That makes the Sony model $100 more expensive when it comes out three or four months from now. That’s a long time to wait just to spend a 25% premium. And you can be sure that the HD DVD camp won’t be standing still; I wouldn’t be surprised to see a $399 HD DVD player this summer, which kicks the difference up to $200, or 50% more. Early adopters are much looser with their disposable income than the mainstream buyer, so I expect that the price is going to become increasingly important to buyers.

As for the early lead in selling Blu-ray titles, Sony executives gave the explanation in their press conference; many Playstation 3 buyers have also bought Blu-ray movie titles to play on their game console. Yes, the Blu-ray player feature was expected to be the king maker in the high-def DVD contest, but there aren’t the millions of PS3s out there that we had expected to be in place by now. And it remains to be seen whether the gamers will keep buying movies; it’s possible that they wanted something else to do with their console while they waited for more games to be released. I’m not convinced that they’ll continue to buy movies at the expense of their game budget.

If you want a good metric of where the competition is headed, don’t look at what the early buyers have purchased. Look instead at Blockbuster Online’s collections. As I write this, the company is offering 150 Blu-ray titles, but has 162 HD DVDs available. That gives HD DVD a slight edge, and shows that Blockbuster is buying 8% more HD DVDs than Blu-ray discs. If the demand for Blu-ray was truly as lopsided as the Nielsen statistics indicate, you can be sure that Blockbuster would have their inventory adjusted accordingly.

You subscribe to a cable service. You expect that you’ll get your local television stations as part of that service. If you are paying extra for digital cable with HDTV service, you might expect to get the local HDTV broadcasts as well. And you might well be wrong. As we saw in the days leading up to the SuperBowl, owners of local television stations were insisting on getting a piece of the action from the cable subscriber fees. Cable companies pay the producers of the cable-only channels for their content, so why shouldn’t the local television stations get something as well?

It appears that some cable companies are willing to accept the stations’ argument. Last week, there was a major announcement on this front as CBS reached agreements with nine different cable operators. The deal gives the cable services the right to rebroadcast analog and digital programming, including HDTV content, from stations owned and operated by CBS. According to CBS, these are long-term agreements, and among the nine cable companies are several with more than a million subscribers each.

The networks that broadcast over the air in local markets have a huge investment in the content that they produce. As video recorders and other factors threaten the traditional advertising revenue, these networks and stations are going to have to explore new revenue sources. Deals with cable services for local retransmission is likely to become an important component in the new business models for these companies.

Word broke last week that someone had found a way to unlock the AACS digital rights management (which is another way of saying “copy protection”) for the new high definition blue laser DVDs. These discs are “locked” using a key that is stored on the DVD. Someone discovered a way to find the key, which makes it possible to unlock any high-def DVD.

One key aspect of this news is that the techniques used do not appear to run afoul of the provisions of the Digital Millenium Act that prohibit reverse engineering among other strategies. In this case, the hacker apparently just looked at the contents of his computer’s memory as he played an HD DVD. And this past weekend, a company named SlySoft released their “AnyDVD” utility that exploits this new discovery; you can use it to “rip” an HD DVD so that you can store it on your computer’s hard drive. The company plans to release a version for Blu-Ray discs as well.

What makes this development so significant is that Hollywood studios are faced with some unpleasant choices. They could issue a new processing key for high-def DVDs, but that would cause all existing drives to be broken until their firmware is upgraded for the new key. And even then, there would be nothing to prevent someone from using the same technique to identify the new key. Another option would be to abandon efforts to copy protect high-def DVDs.

As I’ve said repeatedly, copy protection is a self-defeating approach for digital media. Sooner or later it causes the consumer more inconvenience than it’s worth to the publishers, and ultimately the content producers will have to remove it. Locks only keep honest people out; those who want to steal the content will always find a way to do so. But when the locks prevent people from using their purchase the way they want, where they want, and when they want, those restrictions will begin to chafe eventually. The discomfort level was reached quickly with Sony’s misguided root kit protection on some of their audio CDs last year, and based on Steve Jobs’ statements, we’re getting there now with Apple’s iTunes. Now it appears that we’ve hit it even before high-definition DVDs have had much of an impact on the market. I don’t support the theft of copyrighted information, but I don’t think that copy protection belongs on our music and movies, and consumers will vote with their dollars for systems that are easy to use, unencumbered by locks and all of their intended and unintended consequences.

Q: New DVD players offer up-conversion of a standard DVD signal. How is this accomplished, and is this feature worthwhile?
John Lee, Hawaii

A: Standard DVDs produce a 480i signal (or 480p if it’s a progressive scan player). The new “upconvert” devices take the roughly 850 by 480 pixel image and scale it up to 720p or 1080p resolution. Now, the brute force way to do this would be to simply make four pixels out of each one in the image, but this would make the image look like a big mosaic or checkboard. Instead, the video processor in the DVD player looks at the image and finds lines and patterns, and then tries to “fill in” the missing data in the expanded image. It can’t create anything that isn’t there in the original image, but if done well, the result appears to have a lot more detail on a big screen than it would if you simply enlarged the DVD image. Apparently, these upscaling players do a good job, and since most movies are standard DVDs, it’s a reasonable way to enhance your movie viewing while we wait for HD movies to appear in reasonable quantity.

Google’s YouTube has lost another possible partner. Viacom announced yesterday that efforts to reach a revenue-sharing agreement with YouTube have failed, and so the company is turning to Joost – formerly the Venice Project — to host online clips from Viacom’s programming. If you’re not familiar with Viacom, you’ll probably recognize the names of its divisions that will be providing television and movie programming to Joost: MTV Networks, BET Networks, and Paramount Pictures. This means you’ll be able to watch Comedy Central and Nickelodeon and Country Music Television on your computer (or on your television if it’s connected to a computer with Internet service).

The producers of copyrighted video content such as Viacom have been giving YouTube the choice of either sharing in the revenues generated by the site or pulling the hundreds of thousands of copyrighted clips from the service. With deals such as this one with Viacom, we may see fewer and fewer clips of copyrighted programming on YouTube which could affect its long-term viability.

I am fortunate to be one of the beta testers for the Joost service, and it appears to have great potential. The user interface is appealing and relatively easy to navigate. Video quality is also good, though I do have a high-speed broadband connection to support it. It’s still in beta testing, so we’ve got a way to go before we’ll know what the service will actually look like and what the quality of service will be, but the early results look like it could be a big success.

Many readers of the HDTV Almanac are already familiar with “Professor Poor’s Weekly Price Intelligence Report“: the fastest and easiest way to find all the advertised prices for HDTVs from the major national retailers. The news is that we have developed a new way to track all these prices, which will make the report more useful and valuable than ever.

We have created a database so that we can track every advertisement by the individual model. The report is now sorted by screen size, then by price, and then by the model. This makes it easy to see if one store is selling the same model for a lower price than another. And as they say on the late night TV ads, but wait! There’s more!

Since we now track the ads by specific model, we can easily report more about each one. In addition to the type of technology and level of HDTV resolution, we also now include whether or not the model has an ATSC digital tuner for free over-the-air HDTV broadcasts.

Of course, when a company adds value to a product, you expect the price to go up. Well, that’s not the case here. For the next three months, we’re cutting the price in half; it’s $5.95 for the latest issue, which is published every Tuesday. And for a limited time, we’re sweetening the deal by giving you $5 back if you decide to buy a copy of “Professor Poor’s Guide to Buying HDTV.” In which case, your copy of the “Intelligence Report” will cost you less than a buck. How’s that for a deal?

Get your copy of Professor Poor’s Guide to Buying HDTV, now available in paperback from Amazon or other fine booksellers.

As the personal computer market gets more constricted and margins get thinner, it should come as no surprise that information technology (IT) companies are looking more and more at consumer electronics (CE) as a way to branch out and pursue the continued growth that corporations seem to equate with success. Two pieces of news from Dell shows that the company is looking hard at CE as part of their turn around strategy now that Michael Dell has taken back the reigns of the company he founded.

An announcement last Friday underscored this focus, as Dell named a new Global Consumer Group, with its own president. Even more telling perhaps was the announcement earlier this month that Dell has started selling the popular line of Sony Bravia LCD HDTVs. Dell has sold computer peripherals and other products from third party manufacturers in the past, including Sony, but this is the first time that Dell has sold HDTVs of another brand. Dell has their own line of HDTVs, which it will continue to sell alongside the Sony products on its Web site. The Dell models range in size up to 37″, however, while the Sony models are 40″ and 46″.

This is not the first time that Dell has pulled back from its own brand products to get more punch from other CE brands. Dell gave up on its DJ Ditty MP3 players and now offers players from Archos, Creative Labs, iriver, Samsung, SanDisk, and Sony.

Whether Dell can make an impact in the CE market the way it did in the IT market remains to be shown. The company certainly knows how to promote products, and they have set the standard for online ordering of technology products. The big question is whether people will be willing to buy televisions online, or will they prefer to go to a local store to make their purchase and drive home with their new set the same day.

Where will you be when the analog broadcasts of television in the U.S. stop? In two years from this weekend, the nation’s TV broadcasts of analog signals will go dark. The FCC has come to the realization that most Americans are unaware of this scheduled event, and don’t understand its significance. Organizations such as the Consumer Electronics Association, the National Association of Broadcasters, and the National Cable and Telecommunications Association are launching campaigns to help educate consumers, but it will take a long time to get the word out.

So what do you need to know about the transition to digital TV broadcasts, and what should you do about it?

First, digital broadcasts are happening right now in just about every TV market. Just like analog broadcasts, these are free, over-the-air (OTA) broadcasts of television signals from your local television stations.

In order to receive these signals, you need an antenna. The frequencies are similar to the analog broadcasts, so an existing antennal may work for you. You can get new antennas that are tuned for the digital signals, however, which may improve your reception.

You also need a digital tuner in your television (or any other device that receives broadcast television signals). All products with a television tuner must have a digital tuner starting at the end of March of this year, so if you buy any TV or video recorder, it will likely have a digital tuner. Look for “ATSC tuner” or “Built-in HD” or “Integrated HD” on the spec sheets or advertisements to find products with digital tuners.

You do not need a digital tuner if you only rely on cable or satellite for your broadcast television content. You already have a settop box or similar device that receives the signal from these services, and that will continue to work. It is not related to the changeover to digital broadcasts.

And just because you get OTA digital broadcasts does not mean that you’ll be watching everything in high-definition. If you have an HDTV with a digital tuner, then you will be able to watch any programming that is broadcast in HD, but at present, that is limited to prime time shows and sporting events (and not even all of those are in HD). And while you can watch digital television on a standard definition television, you won’t get the extra detail of the HD images on the shows that are in HD.

The New York Times published a story earlier this week with the headline “The No-Name Brand Behind the Latest Flat-Panel Price War”. The story makes the case that the Olevia brand of LCD HDTVs made by Syntax-Brillian were responsible for the incredibly low prices seen during last year’s holiday shopping season. The article cites Circuit City’s price of $475 for a 32-inch model, which was indeed an astonishing price.

But there’s a lot more to the story than just the Olevia brand. There are other similarly-positioned brands that did their best to reset expectations at lower price points; V Inc.’s Vizio brand and Westinghouse LCD HDTVs come immediately to mind. But in the grand scheme of things, these three were just gnats buzzing around the market. If you look at the unit volume of sales during the holidays, any one of the large brands outsold all of these smaller brands combined. And one of the biggest of the big was Panasonic, which has a huge stake in the plasma HDTV market.

The best-selling flat panel model last December was a Panasonic 42-inch plasma. The average selling price was just over $1,300. The fact is that Panasonic slashed prices across the board for the holiday season, and as a result, they literally sold boatloads of HDTVs. Why the price cuts? Maybe they had surplus inventory that they wanted to cash in. Maybe they wanted to strike back at the Olevias and Visios and Westinghouses who had lowered 42″ LCD HDTV prices to match or even beat plasma prices. Maybe it was a combination of these. Whatever the reason, the prices came down and the plasmas went out the door. And I believe that in the final analysis, it was Panasonic’s price cuts that drove down prices for everyone else: large and small.