Choose Your Ad

Earlier this month, NewTeeVee reported the results of a study by VivaKi on the best online video ad units. The accuracy and impartiality of the data collection and analysis apparently is open to some debate, but the bottom line is that the results indicate that Hulu could be revolutionizing the use of advertisements with streaming online video, simply by letting viewers choose the ads they want to see.

If you haven’t experienced this yet yourself, there are at least two different approaches used by Hulu. One will present you with a choice of three ads, and you get to choose which one to watch. In many cases, all three are for the same product. The other choice is to watch a long-form ad or movie trailer instead of a shorter version, and in return, you do not have to watch any other commercials for the remainder of the show.

This type of choice was never possible with traditional broadcast TV. The point-to-point nature of streaming content on the Internet, however, makes it easier to add interactive features. It appears that commercials are less objectionable when the viewer is given some measure of control. I also think, however, that this will develop in the future to allow the services to deliver choices specific to your interests. Think for a moment about Google AdWords; advertisers know that their ads will only appear when a user searches for specific terms that are relevant to the advertiser’s products. Well, services like Google know a lot about each one of us as individuals, based on the content we search for, the Web sites we visit, the products we order online, the programs and movies we choose to watch, and much more.

I don’t think it will be long until we start getting offered advertisements tailored to our specific interests. I’ll sit down to watch something Hulu, and instead of watching a car commercial, I may be offered the choice of watching an ad for products related to sailing, bluegrass, or woodworking. One man’s junk mail is another’s interesting information, and if focused more accurately, we may come to see video commercials as welcome additions rather than irrelvant intrusions. And I think I’ll like that much better than the current system.

Netflix Streaming to TVs

A new report by The Diffusion Group reveals that of the Netflix subscribers who have broadband Internet access in their homes, more than 62% of them are using the “Watch Instantly” service to watch all the movies and television episodes that they want, at no additional charge. Perhaps the most telling result, however, is that more than half of that group are watching some or all of these videos on their TVs.

About one third of NetFlix subscribers with broadband watch streaming video on their TVs.

This is a signficant finding, because many people think that it’s too difficult or expensive to get the NetFlix content to their televisions. The advent of NetTVs — sets that can connect directly to a home network — and small adapter boxes such as Roku has made it easy for consumers to get Internet streaming video on their sets without having to install a dedicated computer in their living room. On the other hand, a simple desktop or laptop computer doesn’t have to cost much more than a Blu-ray player.

I would also add that NetFlix has also established an important precedent for this service; it’s free with a paid subscription. There is no per-movie or per-episode fee, so watching content from the “Watch Instantly” service feels no different than searching through your DVR for recorded content. The big difference is that there are no commercials to skip.

The number of people watching Netflix’s streaming content is growing rapidly, and these consumers are likely to resist efforts to switch them to a competing service that charges per view. For this reason, I don’t think that Apple’s efforts to get $.99 TV episodes on iTunes will gain much traction.

Netflix Scores Sony

The Sony Dash is one of the latest network-connected displays to add support for Netflix streaming movies and television.

Sony has a new Wi-Fi enabled touchscreen device that it calls the Dash Personal Internet Viewer. Last week, Sony announced that it was adding a dedicated application to the Dash for the Netflix streaming video service. If you have a Netflix subscription, an icon on the screen will provide access directly to your “Watch Instantly” queue selections.

Consumers are steadily adopting network-connected displays and other devices (such as Blu-ray players), which is resulting in rising demand for video content delivered over broadband connections. All the signs seem to indicate that this trend will accelerate.

Will People Pay for Online Content?

The World Wide Web has changed everything, and it appears that it hasn’t finished changing yet. One of the topics that I keep coming back to is the question of who will pay for production and distribution of video and movie programming over the Internet. One problem is that people tend to like “free” better than something that costs them money. While iTunes has proven that people are willing to pay small amounts for things like music tracks, does that transfer to more expensive endeavors, such as a blockbuster movie? Can you really fund an effort like Avatar through billions of small payments?

A new report from Nielsen points to some promising results. In a worldwide survey, the company confirmed the obvious, with 85% of the respondents expressing a preference for free content. But when asked about specific types of content, many indicated that they would be willing to consider making a payment, especially in areas where they have already spent money online.

A worldwide survey indicates that many users are willing to pay for online content.

At least half of the respondents indicated that the would consider paying for movies, music, games, and “professionally produced video” (which I take to mean network programming). And also impressive was that fact that about 10% of them had already paid for this sort of content. Another interesting result was an apparent link to subscriptions in other formats; 78% of the respondents believed that if they subscribe to a newspaper, magazine, or television service, they should be able to access the online content at no additional charge. And nearly two-thirds of them thought that if they purchase online content, then they should be able to copy it or share it any way they want. And about the same number felt that if they pay for online content, that content should be free of advertisements.

I take this survey as a hopeful sign. Add this to the fact that about two thirds of Netflix subscribers with broadband service have taken advantage of the company’s streaming movie and video service, and it appears that there could be some momentum building for user-supported video content on the Internet. This also could be an encouraging sign for the cable subscription services which want to offer a “TV anywhere” service to their subscribers.

We still don’t know the answers to the big questions about streaming video on the Internet, but I believe that we will solve the problem of how to pay for it.

LED Backlight Prices Falling

Is the glass half full or half empty? DisplaySearch released a report last week that forecasts a rapid drop in LED backlight prices for HDTVs. According to the company’s press release, the current price for an LED backlight for a 40″ LCD HDTV is about $118, and this should fall to $100 by the end of this year. The forecast calls for LED backlights to cost just $50 more than a CCFL (cold cathode fluorescent lamp) backlight by the end of 2011.

DisplaySearch predicts that LED backlights for a 40

Backlight Cost Comparison for 40″ LCD HDTV Panel (DisplaySearch)

This is an aggressive price drop for LEDs, but it looks reasonable because worldwide LED production is exploding. LEDs are being used for solid state lighting replacements for incandescent and fluorescent lights, which is causing an enormous increase in demand. LEDs save energy and space, which is why they are a standard feature for notebook computer screens. And steady improvements in their efficiency only make them more attractive.

But there’s another side to this story. Right now, HDTVs with LED backlights cost a lot more than their CCFL backlight competitors. Using DisplaySearch’s numbers, there is about a $75 premium over the cost of the fluorescent alternative. This is at the bill-of-materials cost, which means that premium gets multiplied before it shows up on the retail price tag. And even by the end of the forecast — the last quarter of 2013 — LED backlights for a 40″ LCD HDTV are expected to cost more than twice as much as CCFL.

My guess is that the improved color performance, thinner screen design, energy efficiency, and solid state reliability of LEDs will likely trump the cost savings of CCFL, and they will become standard just as they have with notebooks. This will act as a small drag on the falling retail prices for LCD HDTVs, but there will be enough other downward forces that we will probably still see prices continue to decline over the next couple of years.

Sony Pulls Plug on OLED TV in Japan

It’s only 11″ diagonal. It’s not even HD resolution. And it costs a mind-boggling $2,222 in Japan. But it’s OLED and it looks great, so it gets a lot of attention. Apparently, however, it hasn’t gotten enough attention. Sony will stop production of its OLED TV for Japan, just two years after it started. It is also significant that the company is not announcing a larger follow-on model, even though it has been showing one for years at CES and other industry events.

The fact is that Sony has only been producing this product in prototype quantities, with no signs of approaching full scale production. At the current price, it’s not surprising that they didn’t want to produce more units, as the demand must be severely limited. This now leaves the field to the similarly priced but HD resolution and slightly larger LG 15″ OLED HDTV.

Sony made an enormous fuss over its launch of the OLED TV, which many of us in the industry questioned on the grounds that it was such a weak product. Now the company can shift its focus to 3D, in hopes that it can reestablish its reputation as a technology leader in that segment of the market. Unfortunately, it is not likely to fare any better, as we will rapidly see all flat panel HDTV manufacturers move to add 3D support to their products.

More Bad News for High-End Retailers

Another one bites the dust. Last week, the Washington DC area electronics retailer, MyerEmco Audio Video, announced that it was going out of business. Lack of available credit was cited as a major factor in the company’s demise. The president announced that the store would sell remaining inventory at half-price, with larger discounts available as they near the end of their stock.

One of the keys to the company’s failure was the downturn in new housing. This may seem strange at first glance, but high-end audio/visual stores like this rely heavily on new construction of expensive homes, which often include extensive wiring and complex home entertainment system. With housing starts stalled, the company lost its new installation business. Many buyers economized by buying directly from big box stores, and handling their own installation. And with increase information available on the Internet, consumers need less help from the experienced staff of the dedicated stores like MyerEmco.

As I’ve said before, there will always be a niche for high-end system integrators and installers, but not only is that market not growing along with the increased demand for HDTV and other home entertainment products, it’s actually shrinking. MyerEmco is just the latest casualty, but it’s certainly not going to be the last.

3D Front Projector for the Home

The new Acer S5200 DLP projector is capable of showing 3D stereoscopic content.

Acer has announced the S5200 DLP projector that is certified for 3D image projection. It supports a 120 Hz refresh rate, making it suitable for stereoscopic 3D content using active glasses. The projector is not capable of HD images, as it is only has XGA (1024 by 768 pixel) resolution, but it is reportedly priced around $1,000.

It’s still too soon for all but the early adopters to be buying 3D hardware, since the available content is still very limited. But this announcement shows that many display companies are already rolling out products that support 3D. And by the time the content catalog grows to sufficient size, competition will likely have wrung out most of the price differential. We’ll be buying 3D-capable displays at just about the full range of price points.

Apple Wants Lower Prices

According to a Wall Street Journal article last week, Apple is in negotiations with TV networks to lower the price for TV shows sold on the company’s iTunes site. The report indicates that the goal is to make video content more affordable when the iPad starts shipping, presumably in support of their claim about it being the best way to watch such content. One source indicated that Applie has already been experimenting with $.99 per episode pricing, which is half the price for their standard definition TV shows. (HD versions cost $2.99 each.)

I find this to be a curious move, and wonder if Applie is falling farther and farther behind the curve. Leave aside the question of just how well suited the non-HD iPad is for video watching; are people going to want to buy episodes when so many are available for free? The network sites and Hulu offer a wide variety of episodes for on-demand viewing. If you’re a Netflix subscriber, you have streaming access to a large selection of shows at no additional cost.

TV episodes are qualitatively different from CD tracks. I believe that people are more inclined to buy music tracks which they will load into their iPod and listen to over and over. I don’t expect that people will be loading TV episodes into their iPads so that they can watch that same show over and over. Maybe I’m biased by my own personal preference, but I rarely like to watch reruns, especially in the same year as their first run.

Sure, Apple will sell more TV episodes if they cut the price in half. And yes, some people will watch them on their iPads. But I don’t expect the pricing or the delivery to have an impact on the television programming market that comes close to the impact iTunes has had on the music industry.

The Power of Internet TV

You won’t find this in your TV guide. It barely got mentioned on the national news that I heard this morning. You may not know it, but the U.S. challenger, BMW Oracle Racing, won the America’s Cup back from the Swiss defender yesterday by winning the second race in a best-best-of-three competition. Oh, this is about sailing, by the way.

ESPN360 broadcast complete coverage of the America's Cup sailing competition last week.

So why am I mentioning it here? I’m a fan of sailing, and there’s not a lot of coverage of sailing events on broadcast television, even on cable or satellite stations. In this case, each day of racing took four or five hours of coverage. The event was held in Valencia, Spain, on the Mediterranean, so the start times were around 6 AM Eastern and 3 AM Pacific. This is hardly the prime time where a network would want to launch expensive coverage. The problem was made worse by the fact that on the first two days scheduled for racing — last Monday and Wednesday — nothing happened. No race. (There was too little wind on Monday, and too much on Wednesday.) How would a major network deal with an event like this that doesn’t even do anything the first two days? Who’s going to come back on the third day, and how do you fill the missing time? And will you be able to clear the schedule for additional coverage on subsequent days? Keep in mind that the whole thing could have been over on the second day, but in fact it hadn’t even started then.

Thanks to ESPN360, however, there was professional coverage start to finish of the whole event. They had expert commentators, cameras on the water and in two helicopters, and some very slick computer graphics with instantaneous speed and leader advantage data (much like you get now for car racing coverage). Under normal circumstances, it’s hard to see which boat is actually in the lead at times. With this coverage, you could see which boat was faster second by second. It added to the excitement of the event.

And I could watch it for free online, whenever I wanted. I started watching yesterday while the race was still going on, but I was able to quickly rewind to the beginning and watch without knowing the final outcome. And watching it in full screen on my HDTV greatly enhanced the experience.

Now, no broadcast network would give up the time for an event like this, yet ESPN was able to make it available on the Internet. Even though the target audience was tiny compared with other sporting events, they were able to assign the resources to provide the coverage. The Internet makes it possible to reach a group of viewers with a narrow interest like this, which in turn provides advertisers with laser-focused access to their market. This sort of “narrow-casting” is an important part of the future of video on the Internet.