Monthly Archives: April 2011

EPIX Multi-Screen Strategy

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EPIX is a a movie channel for subscription TV services including cable, satellite, and telco (such as Verizon’s FiOS). It boasts recent releases from major studios, including Paramount, Lionsgate, and MGM. But you aren’t just limited to watching the movies and other programming on your TV service when they are scheduled; EPIX is also a streaming on-demand service that lets you watch any of about 3,000 titles from its catalog whenever you want.

You can watch on your computer if you like, but the news is that the company is aggressively pursuing a multi-screen strategy. On Wednesday, the company announced the roll out of “apps for download on over one hundred consumer electronic and mobile devices including Android-powered tablets and phones from a variety of manufacturers such as Motorola, HTC and LG; Samsung TVs and Blu-Ray players; Google TV; Roku streaming players; and the BlackBerry PlayBook. ” In short, you can watch the content on a wide range of popular products.

The big difference between this and other streaming services such as Netflix is that it is free to “authenticated subscribers“. If you’re already paying for EPIX as part of your television subscription, you can access the content on these other devices. That could be a real bonus for cable and satellite users. On the other hand, it does not pose an a la carte threat to those services the way that Netflix does, because you can’t get it without the subscription. Since there are far more U.S. households with TV service subscriptions than without, they appear to be addressing the fat part of the market.

From my perspective, this strategy means that EPIX is backing the status quo. This is fine if the cable and satellite services can survive the squeeze of consumer resistance to price hikes and the pressure from the content providers for more retransmission revenues. I suspect, however, that EPIX will be nimble enough to shift over to a stand-alone model like Netflix if the authenticated user model doesn’t work out. This is a business model that is worth watching.

Wanna Buy a Cable Business?

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An article in Multichannel News reports that Charter is looking to sell its cable business in Los Angeles. It appears that the normal way these deals go down is to swap subscribers with a competitor, but Time-Warner Cable apparently turned down a deal to trade for its business in parts of Wisconsin where Charter already has more than half a million subscribers.

So now it appears that the Los Angeles subscribers may go on the auction block. If you’ve got a spare $2 billion or so, you may be able to acquire your own cable company in southern California. Was this just a shrewd move by TWC, figuring it would be able to buy the business for less at auction than the value of its Wisconsin subscribers? I guess we’ll find out when the gavel drops to end the bidding. But it’s clear that a lot of cable subscribers in L.A. will be dealing with a different company before long.

Netflix is #1

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Pay no attention to the man behind the curtain! It’s just little ol’ Netflix, doing it’s little streaming video thing. Nothing to see here, move along, move along. At least, that seemed to be the message on Monday when CEO Reed Hastings announced the company’s first quarter financials. All they did was about double worldwide revenues and about double U.S. subscribers over the previous year’s number’s. Oh, and overall revenues were up nearly 50%. But Hastings stressed that Netflix “is a supplemental channel to MVPD.” (MPVD is tech speak for Multichannel Video Programming Distributor, which you and I might call subscription television services, like cable and satellite.) So do not fear little ol’ Netflix, you establishment enterprises; it’s not the agent of some cord-cutting nightmare.

Oh, and by the way, Netflix has passed Comcast in number of subscribers, which makes it the number one television subsctription service in the country.

Should Comcast and the other cable companies be concerned? Netflix has only landed a deal for its own original content, with Kevin Spacey starring in the new series House of Cards. It made a deal for past and future episodes of the hit Mad Men. It spent $1 billion to license films from Paramount Pictures, Lions Gate, and MGM. Sure, it’s just a little movie rental company. (Isn’t this how HBO got started?)

Lots of analysts are saying that the new Netflix business model is not sustainable. They’re probably right. But for now, the company is building up its bank accounts, and when it’s ready to establish a new strategy, it’s going to have its own deep pockets, an enormous brand, and significant momentum that can carry it through to its goal. Just remember, there was a time when Amazon was just an online bookstore.

Dark Friday

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If you’re planning on relying on the Internet to get work done on Friday – especially if you’re on the East Coast — you may want to think about working unplugged. William and Kate may spoil your day.

Not even the HDTV Almanac is a Royal-Wedding-Free zone. But rather than focus on bridal trains and the like, I’m going in a different direction. Liz Shannon Miller wrote a terrific piece for GigaOM about the potential impact of the wedding on the Internet. She points out that YouTube will host a BBC live feed without commentary. And the Associated Press will also be providing a feed that will be hosted on multiple sites (and for a surprisingly small fee, your site can be one of them).

The question is whether or not the Internet is up to the task of worldwide Royals mania. Broadcast television is one thing for live events with a massive audience; it is by definition a single channel of content that is delivered to multiple points – possibly millions in some markets — all at the same time and with the same bandwidth. In contast, the Internet is a point-to-point system, and even if you’re watching the same thing at the same time as the person in the next cubicle, the packets are still individually targeted to your separate computers. And streaming video requires lots of data packets.

Many of us have seen the effect that an early school dismissal for snow on a local cable broadband service; performance can tank for the rest of the afternoon. If everyone else on your cable system decides to stream the royal wedding, it is likely to impact your ability to access data on the Internet. And that’s any data, not just the wedding ceremony video stream. Email, browsing, and other typical activities could be affected. The same holds for small networks that share access to the Internet, such as your company’s network. And even if your network is up to the task, it is not for certain that your broadband service provider or other upstream systems will be able to handle the load without buckling.

If you want to help ease the strain on Friday, eliminate as many video streams on Friday as you can. Set up a large HDTV in a central location and receive a broadcast television signal for all who want to watch, in return for a pledge that they won’t stream the video when they return to their desks.

Friday will be a stress test for the Internet and a lot of other systems. Nobody knows what the impact will be, but I won’t be planning on doing a lot of critical online work on Friday. That doesn’t mean that I’ll be watching the William and Kate show; I’ll just have plenty of offline work prepared.

CALM Act: Your Tax Dollars at Work

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If you watch television programming that has commercials, I’m sure you’ve experienced it more than once. Your program winds down to a sensitive, thoughtful stopping point, and then there’s a commercial break. And the very first commercial BLOWS YOUR EARS OUT!!! You lunge for the remote and mash the Mute button, wondering “why doesn’t someone do something about this?”

Well, you can now rest easy because your government has heard your pain and done something about them. Last December, in an uncharacteristic fit of bi-partisan cooperation, Congress passed the “Commercial Advertising Loudness Mitigation Act” and President Obama signed it into law. Known better by its initials, the CALM Act gives the FCC one year to come up with a solution to commercials that are too much louder than the programming that surrounds them. And what is the solution? To follow the “A/85 Recommended Practice” of the Advanced Television Systems Committee (ATSC).

Huh? The FCC is now charged with enforcing a standard that was published in November 2009. It is designed to set a “uniform loudness” which results in a “comfortable volume between disparate TV programs, commercials, and channel changing transitions.” If this is based on an ATSC “best practice”, then why haven’t the major networks already adopted them? (NBC Universal and FOX apparently were demonstrating compliant systems at the NAB conference this spring.)

The fact remains that advertisers are going to want their ads to be louder than anything else around it. And they’re not going to want the ad to play more quietly during a break on “Grey’s Anatomy” than after a timeout on “Monday Night Football”. The ATSC approach does help normalize levels some, but I’ve got no doubt that there’s plenty of room to “game the system“. Given the dynamic range of television and movie soundtrack content, I expect that there will always be room to make commercials louder than some people would like. And note that the CALM Act only applies to those “stations” that the FCC can control. Online streaming services such as Hulu aren’t bound by FCC rules, so don’t expect them to solve the problem soon.

DisplaySearch: TV Replacement Cycle Shortens

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According to a press release from DisplaySearch, the company’s new study reports that consumers worldwide continue to replace their televisions more frequently than in the past. Traditionally, consumers replaced a CRT TV with another CRT TV every 10 to 15 years. That cycle is much shorter now, and not just in the U.S. but worldwide.

Clearly, the advent of high definition programming and the ever-decreasing prices for flat panel sets has played a major role in this trend. DisplaySearch cites some interesting results from their research, however. An outdated or broken TV was a factor in the decision to get a new set, but it was not one of the top factors, according to the study. Even more interesting is the finding that advanced features such as streaming content from the Internet or stereoscopic 3D support have not been a major factor either.

One of the big drivers for new purchases was price. The 20% annual price drops that we’ve seen in recent years keeps bringing the new sets within reach of more buyers.

DisplaySearch does not share the report’s forecasts for future replacement rates, but some markets including the U.S. must be approaching saturation. If the industry can’t keep lowering prices, I expect that U.S. TV sales will have to level off sooner or later. Fortunately, it looks as though the BRIC countries (Brazil, Russia, India, and China) are poised for increased consumer demand for flat screen televisions, so the industry will probably enjoy unit sales growth for quite a while.

Philips Quits the TV Business

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Once a worldwide leader in the television industry, Philips has thrown in the towel and is exiting the business. The company has been headed in that direction for some time. In 2008, they licensed their brand name to Funai for sales in North America. (Funai also makes televisions under some other familiar brands, including Emerson, Sylvania, and Symphonic.) Philips already has similar licensing agreements in effect for China and India.

The company has announced that the rest of its television business will be taken over by TPV, which already licenses the brand name for television sales in China. TPV is better known for its other brands, including AOC and Emerson.

Will this change have a big impact on the flat panel television market? Probably not. TPV is likely to continue to get many of its panels from the same suppliers, so it probably won’t change their sales in the short term. It is possible that TPV may transition to lower cost panels from other sources, but that will likely take some time and the current market share of the Philips brand is not so large that this would cause a sea change in the supply chain in any case.

Still, it’s another data point marking just how difficult the flat panel HDTV market has become. I won’t be surprised to read news of other well-known names getting out of the business before this year is over.

More on Bigger OLED Displays

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This is totally propeller-headed, but a company named Cymer, Inc. made an interesting announcement in a press release last week that said, in part:

Cymer, Inc. (Nasdaq: CYMI), announced today that TCZ, its display equipment product division, has received a volume order for the TCZ-1500B, TCZ’s new Gen 5.5 crystallization system, from a leading Asian flat panel display (FPD) manufacturer. This represents TCZ’s second volume order in 2011 and fourth tool customer. The TCZ-1500B system is used for the production of advanced liquid crystal display (LCD) and next-generation organic light-emitting diode (OLED) displays that are targeted for applications such as high-end smart phones and tablet computers.

Enabled by Cymer industry-leading light source technology, the TCZ-1500B incorporates a high-power laser for increased throughput, and the Gen 5.5 system allows for a three-time increase in substrate size compared to Gen 4 systems, reducing manufacturing costs for display makers.

That doesn’t seem to say much, but it says a lot. The typical amorphous silicon backplane used for LCD panels is not efficient enough for OLED displays. Panel makers have relied on “laser annealing” to turn the layer into polysilicon, which is a sheet of tiny crystals. The problem is that the laser process could not be used on large substrates, which is why most of the OLED displays available today are small ones intended for use in mobile devices.

So here comes Cymer stating that it has a laser annealing system that handles substrates three times larger than the Gen 4 systems that are currently in use. That could be big news.

There’s still a lot that isn’t said in the release. Does the annealing process cover the entire Gen 5.5 substrate in a single pass? If so, that should make production much more efficient (and opens the door to the possibilty of multi-pass treatment of even larger substrates). The release also does not name the “Asian flat panel display manufacturer”, but it is almost certain to be Samsung; the company has been very public about its plans to start OLED production on a Gen 5.5 line this summer.

These hints and signs lead me to believe that I’ve been wrong about the prospect for larger OLED HDTVs. I now expect that we may well see some larger models become commercially available before the end of the year, though I still expect them to be priced at many multiples of an equivalent LCD model. It still will take time for the manufacturing process to catch up to the efficiencies of LCD production, so don’t count on a big OLED HDTV under your tree this year.

New Hybrid Portable TVs from RCA

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At the NAB show last week, RCA demonstrated three new portable LCD TVs. All run on battery or AC power, and both can pick up standard ATSC digital television broadcast signals. What makes these two models particularly interesting is that they also can receive the new Mobile DTV signals (that I discussed last week).

Two models have 3.5″ LCD screens: DMT335R and DMT336R. The 335R model runs on AA batteries and has a list price of $119. The 336R model has built-in rechargeable batteries and also receives FM radio, with a list of $159. The DMT270R has a 7″ widescreen WVGA LCD display and rechargeable batteries, and a list price of $179.

I have not seen these products in person, but at these prices, I don’t expect that you’ll get top-of-the-line LCD panels in them; they clearly are not high definition displays. Still, they should fill the need for a battery powered television for your emergency storm kit, and can give you a relatively low cost way to explore the new Mobile DTV services if they are available in your market. For entertainment on the go or information updates when the power goes out, these could be very handy.

Walmart Shrinks CE Store Space

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Walmart recently announced that it was expanding the number of HDTV models that it will offer, but that apparently will be primarily for online sales. The company has announced plans to actually shrink the display space allocated to consumer electronics products in their brick and mortar stores.

Part of the move is due to their perception that the flat panel TV market has stabilized a bit, and sales growth will taper off now that most U.S. consumers have dealt with the analog-to-digital transition. As a result, the in-store mix will shift toward smaller devices including tablets and smart phones, including Apple products.

While I’m not sure how much the digital transition had to do with it — most U.S. viewers rely on cable or satellite service and don’t use tuners on their TVs in most cases — it does make sense that the feeding frenzy may be subsiding and consumers won’t feel a compelling need to replace the sets they’ve purchased in the recent years. And it also seems that online marketing is going to play an increasing role in consumer electronics going forward.

On the other hand, televisions are one of the few products that I want to see in person before I make a buying decision. I recognize that it is an expensive proposition to outfit all the Walmart stores with a complete inventory of sample HDTVs, but I have to wonder whether or not customers will just decide to go elsewhere when they want to kick the tires on a new TV.