Monthly Archives: March 2012

Reader Mail: The Future of Cable TV

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I get a lot of email from readers, and occasionally I share our exchanges here. This week, I got a particularly interesting message about this week’s post about “Online Streaming Grows“:

You close with the statement that a cable or satellite TV service should be figuring out what to do when their current business falls apart.

There is one big hidden assumption that you seem to be overlooking here, namely the idea that all the users of these services have a fast enough Internet connection to be able to all be streaming at the same volume of TV watching.

I live in Southern California, just outside of LA, in what would otherwise be considered a fairly large community (125K people, growing >10%/year), and I am in the central, long built-up area of town. But the best Internet connection that I can buy would not support HD streaming to all the TVs in the house, what I am currently paying >$100/month for is only 1.5Mb down. People who are in more remote areas are in even worse shape.

The broadcast method of delivering the same content to many destinations is fantastically efficent and is unlikely to go away. Cable and Satellite providers do not have enough bandwidth to be able to provide each subscriber with enough bandwidth to have them all simultaneously streaming.

Having said all this, I’ve had a Tivo for over a decade, and I seldom watch live TV. When I do it’s typically to have something going in the background. I could see there being much heavier use of DVRs and having the more popular shows being broadcast once per day (instead of 2-10 times between repeats and different time zone slots) with the DVRs recording the shows the first time they air for viewing later. This would free up a significant chunk of the available broadcast bandwidth for ‘special requests’, which could get streamed out to everyone as well. Recording all of this stuff would be fairly inefficient, but drive sizes are getting large enough that it’s no longer impossible.

And here is my reply:

Thanks so much for sharing your comments. I think you’re right on target in many respects, but I also believe that your analysis and mine not only survive side-by-side, they are probably inevitable.

There are always remote outlier areas of just about any population, especially in the U.S. There are regions where terrestrial broadcast does not reach, for example. In some cases, those areas can be rather well-populated such as the valleys of Vermont. Terrestrial broadcast can’t reach these viewers, so alternative approaches have a window of opportunity, such as digital broadcast satellite (DBS).

Moving to the issue of Internet access, the same problem of sparse population and long distances can make it not cost-effective to build out higher capacity transmission systems. It is likely that it will be a long time — if ever — before it becomes feasible to provide high speed service to remote areas.

So far, we’re right in sync. But here’s how I see it going forward. I believe that “watching what I want, when I want it” will trump linear programming, and that other solutions will be offered to viewers with lower bandwidth. For example, they would simply create a queue of programming that they would like to watch (just as they do now with Netflix, Hulu, or TiVo), and the content would be trickled to temporary storage onsite. (Terabytes are amazingly cheap, and still getting cheaper. I saw a 2 TB external USB drive for $100.) You can move a show up in priority, and it will be ready to watch sooner; the system could even alert you when it is “ready” even though the download is not complete, and you can “chase” the show while the rest of it downloads.

This would have minimal impact on the viewing experience of the user, while delivering almost the same benefits that a high bandwidth subscriber would get. I think that this would be a much more likely scenario than trying to use the terrestrial broadcast system to deliver the content.

I believe that something like this is likely the best-use case for the existing cable infrastructure, and that with the exception of maybe a couple live channels, linear programming is likely to simply go away. Not tomorrow, not next year, but I think it’s the logical outcome of the current trajectory.

Thanks again for writing.

Did something I write make you go “Hmmm?” Please take a moment and share your thoughts by sending me an email at alfred@hdtvprofessor.com.

Bye-bye, Polycarbonate Discs!

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The writing is on the wall. Or perhaps it is just encoded in microscopic pits on a polycarbonate disc. But wherever you choose to read the signs, it is clear that physical distribution of entertainment media is on the way out. It has happened in the music industry, and we appear to be reaching a tipping point for movies as well.

New research by IHS Screen Digest Research predicts that in 2012, U.S. consumers will pay to watch more movies online than they will watch movies recorded on DVD and Blu-ray discs. Note that this research covers the money paid for legal downloads of this content. The forecast is that we will watch 3.4 billion streaming “views” this year, compared with 2.4 billion viewings of movies on discs. And their forecasts call for the online views to continue to grow rapidly while the disc views continue to decline.

IHS also makes an interesting point. Even though streaming views will dominate in 2012, the physical discs will continue to generate more revenue. The streaming movies are expected to earn just $1.7 billion. (Forgive me; did I really write “just $1.7 billion”? That is still more than the annual GDP of Belize! My apologies.) In contrast, the physical discs will likely generate $11.1 billion this year.

This may seem like a wildly lopsided comparison; who wouldn’t want 6.5 times more revenue? Keep in mind, however, that the marginal cost — the cost to produce the next copy of a product — is nearly zero for the streaming version. The physical version has a disc, packaging, handling, and shipping that go against that extra money. So as the market matures and the online movie services can further streamline their operations and reduce costs, it is possible that they will make more money even though consumers pay about $.50 per streaming video on average, compared with an average $4.72 for the physical discs.

From where I sit, I think the Netflix decision to move away from physical discs and toward streaming services was the right choice at the right time. These numbers appear to support that decision.

More Homes Are Hooked Up

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A new report from The Diffusion Group (TDG) updates the company’s research on broadband in U.S. homes. One interesting point is that about eight out of every 10 homes with broadband Internet connections now have home networks. This is presumably driven by the consumers’ interest in connecting more devices to the Internet than before.

TDG Home Network Research Results

[Credit: TDG]

Perhaps the most interesting development, however, is the location of those home network routers. TDG’s research shows that they have been moving steadily out of home offices and into living rooms. Presumably, home entertainment is taking priority over home computing, as the users want to connect their video game consoles, televisions, network media players, and Internet-ready Blu-ray players to the world.

This is one more bit of evidence that consumers are turning to the Internet more and more for entertainment and information, and the traditional channels of broadcast and subscription television services are going to continue to lose mindshare among U.S. audiences.

My HDTV Buying Advice [a Slashdot video]

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Do you ever wonder what I tell people when they come up to me at a party and ask “What should I buy as my new television?” The website Slashdot wondered, and they commissioned a video interview of me that they call “HDTV Expert Alfred Poor Tells You What to Buy and What Not to Buy“. (The interview was conducted, recorded, and edited by my friend and colleague Robin Miller.)

I won’t recap the whole conversation here, but at the end, you’ll find out the specs for the television that I would buy today if I were replacing our current television.

The big news, though, is about what happens when a story about your site ends up on the home page of Slashdot, like mine did yesterday. Because there was a link to the HDTV Almanac in the piece, curious visitors flocked to this site. Perhaps I should say “flooded” the site, sort of like a digital tsunami. Within an hour of the video being posted, my site was down because the monthly bandwidth allocation had been exhausted. (Needless to say, that has never happened before.) Thanks to the great folks at our hosting service, Advanced Network Hosts, the site was back up and running in just minutes. By the end of the day, more than 12,000 visitors dropped by to check out the HDTV Almanac yesterday.

So if you encountered a strange error message yesterday, or perhaps the site loaded a little slower than usual, that’s what was going on. And if you’re one of the new visitors who cam here by way of Slashdot, thanks for dropping by! I hope you’ll keep checking back for the latest independent news and commentary on HDTV and related home entertainment topics.

I write about lots of different technology stuff that I find interesting; please consider following me on Twitter — @AlfredPoor – or Google+ — Alfred Poor — to hear about some of my latest articles.

Online Streaming Grows

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As reported by Jim O’Neil in Fierce Online Video, the Roku CEO Anthony Wood gave a keynote address at the OTTCon in San Jose, California, last week. Wood is quoted as making several noteworthy remarks (and I recommend that you read the whole article), but the part that jumped out at me was this:

As the number of channels grow–there are almost 500 on Roku now and a new one is being launched almost every day–viewing has [to] grow. Roku has seen its viewing time increase from six hours a week to 12. And I think it’s going to continue growing until it reaches 35 hours, the average that viewers watch today.
Let me repeat that with emphasis: 500 channels on Roku. Tell me again what you’re missing if you cancel your cable subscription? Actually, I know the answer; major channels such as ESPN and some of the premium channels offer programming that cannot (yet) be matched online. But when people are watching as many hours of over-the-top streaming video as they currently watch of the linear broadcast content, don’t you think that the ESPNs and HBOs of the traditional media might take notice? Clearly, they already are aware and are deep into their own experiments into Internet streaming for their content.
Oh, and HBO Go is indeed one of those 500 channels on Roku already. If I were running a cable or satellite television service, I’d be trying hard to figure out what I’m going to do when my current business falls apart.

Competition Does Not Lower Cable Fees

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The Federal Communications Commission released a report this month with the descriptive yet cumbersome title of “Report On Average Rates for Cable Programming Service And Equipment.” The results come from a study of cable television service fees in different markets. The data was divided into two groups: communities where there was no meaningful competition (aside from satellite) and those where there was a competitor (either cable or phone company). The data is a snapshot taken in January 2010, so it’s not exactly current, but the results were a bit surprising all the same.

In the “competitive” communities, the price of “basic” cable service was about the same as with the “non-competitive” markets. But when it comes to “expanded basic” service, the price was actually slighty higher in the “competitive” markets. This result gets even more interesting when you calculate the “cost per channel” for the different companies; those in “competitive” markets had a lower cost per channel.

What this means is that the cable companies in competitive markets lard their offerings with more channels, so you get more for your higher fee. I’m not too sure that it’s a bargain. It reminds me of the story about two little old ladies on a week-long cruise. They share a table at dinner, and about halfway through the trip, one looks at the other and remarks, “The food on this ship isn’t very good, is it?” To which the other replies, “No, I suppose not. But they do give such nice large portions!”

I suspect that large portions will not be enough to satisfy subscription television customers much longer.

And Now, Live, on YouTube…

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What are the hallmarks of a major television network? It distributes professionally-produced content from other sources such as movies. Check. It has millions of viewers. Check. It has its own original programming that is broadcast live daily. Check. Hmmm, it waddles, swims, and quacks like a duck, so I guess YouTube is now a duck. I mean, a major television network.

The latest development is the announced launch of “My Damn Channel LIVE” which is set to premiere next Wednesday at 4 PM Eastern. The host, Beth Hoyt, apparently provides the “live” component, and introduces clips from “more than 30″ comedy shows.

 

I mark this as an important milestone, even if the show will only run for 30 minutes on Wednesdays, and just 10 minutes Monday, Tuesday, Thursday, and Friday. (What? Does Beth have to be someplace else by 4:30 PM on those days?) Hey, it’s a start. And it demonstrates that Hollywood does not have a lock on live or recorded video production (as also demonstrated by online coverage of March Madness). I’ll be watching to see how successful this new YouTube program turns out to be.

Sharp Ships Big HDTVs

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Sharp already announced its intention to focus just on big HDTVs, and they are making good on that promise. The company has announced that it has started shipping its 60″ LC-60LE745U and 70″ LC-70LE745U models from their new 2012 lineup. These have 3DTV support, LED edge-lighting, and Smart TV features including WiFi support. The sets have list prices of $2,299.99 and $3,299.99.

Sharp also announced that they will start shipping the 8 Series models next month: these include the LC-60LE847U, LC-70LE847U, and LC-80LE847U, in 60″, 70″, and 80″ sizes. List prices for these will be $2,699.99, $3,799.99, and $5,999.99, and the sets will include Sharp’s Quattron feature that adds a yellow sub-pixel to the typical red, green, and blue elements. Also the 80″ model includes a full-matrix LED backlight instead of edge-lighting. This presumable provides a more uniform backlight but also requires more LEDs, and that probably contributes to its significantly higher price.

Sharp wasn’t kidding when they said big HDTVs! It used to be that you’d only get TVs this large with rear projection technology, but now we have it in flat screens and at a price that probably isn’t far from what a similar size rear projection model cost when it first came out. However, there is a limited market for HDTVs that cost more than $2,000, and I suspect that Sharp’s strategy will result in a loss of market share (not that it has that much to lose anyway).

Who Gives You Your News?

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“Freedom of the press is guaranteed only to those who own one.” A.J. Liebling

The Pew Research Center has released its “State of the News Media 2012″ annual report on American journalism. It provides some fascinating information and analysis, and is bound to make you go “hmmm” more than once.

The part that had me scratching my head and pondering the future was their finding that in 2011, “five technology companies accounted for 68% of all online ad revenue.” This is in the context of the observation that companies such as Google, Amazon, Facebook, and Apple are working hard to gain control over a vertically-integrated mesh of hardware, software, and content, as well as the related revenue streams. The report looks in particular at how these large companies are beginning to get involed with mainstream news media:

As a part of YouTube’s plans to become a producer of original television content, a direction it took strongly last year, it is funding Reuters to produce original news shows.  Yahoo recently signed a content partnership with ABC News for the network to be its near sole provider of news video. AOL, after seeing less than stellar success with its attempts to produce its own original content, purchased The Huffington Post. With the launch of its Social Reader, Facebook has created partnerships with The Washington Post, The Wall Street Journal, The Guardian and others. In March 2012 Facebook co-founder Chris Hughes purchased the 98-year-old New Republic magazine.

We’ve encountered media barons before; Rupert Murdoch’s empire ranks right up there among the most influential. But it appears that we could be watching the development of something that reaches further into our lives than ever before. The same company that sells you the device on which you read or watch the news also could create the operating system, own the transmission channel, and even fund the news gathering itself. The opportunity for continued shrinkage in the number of active reporters is real, and we could find fewer sources providing more limited views of current events. They don’t even have to block access to distribution to clobber their competitors; they just run them out of business through financial integration of their own operations.

I’m not ready to say that the news media sky is falling. While I also don’t believe that “citizen journalism” is the answer to all of these ills, it does present a useful counterforce and that genie will be difficult to put back in the bottle. Still, massive power does present the opportunity for abuse. Those who believe in the rights of a free press and need for a free exchange of ideas and information will do well to keep a vigilant eye on these developments. Fortunately, we have the Pew Research Center providing valuable data points along the way.

Bed-Sized 3DTV in China

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How much is too much? If it’s possible to go too far with a television set’s specfications, this could be it. China Star Optoelectronics Technology Co Ltd is a subsidiary of the electronics giant, TCL Corporation, and earlier this month, the company announced a monster of a 3DTV.

(Credit: TCL Corporation)

This behemoth measures 110″ diagonal. It also has 4K by 2K resolution, or 4,096 by 2,160 pixels. That’s the same as if you had glued four 55″ 1080p screens together. And it is an active 3DTV display, using shutter glasses for the stereoscopic view. And if that’s not enough, it also has multi-touch touchscreen input.

The company’s press release is silent on plans to make this a commercial product, but does indicate that two units were donated to the Great Hall of the People in Beijing for public display. This points to what is likely the true motivation for the technology demonstration. It shows that China is able to hold its own in terms of innovation in the display industry. TCL quotes an expert from Fudan University; “China will replace Japan and South Korea as the world leader in TV display screens in terms of manufacturing and R&D in three to five years, and will provide a higher level of quality and more cost-effective products to the global community.”

Clearly, this is a very large stake to drive in the ground, but China is marking its territory. Given the current state of the flat panel industry, however, China could end up like the dog who chases a cat, and then has to figure out what it wants to do with it once it catches it. There could be a lot of corporate blood and fur strewn about before this is all over.