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For more information, consult our: MRG November 2007 IPTV Bulletin
Bell Canada Postpones IPTV Service
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| Provider | HD Channels | Price |
| AT&T U-Verse | 25 HD channels | $10/month |
| Verizon FiOS TV | 20 HD channels (16 national, 4-5 local) |
$9.99/month |
| DirecTV | Over 200 HD (NFL games) |
$9.99/month |
| Comcast | 15 HD Channels | $5/month |
DirecTV has the most HD channels, but most of those are sports programming. Removing those extra channels, AT&T’s U-Verse, an IPTV service, is beating cable and satellite. Comcast has the fewest HD channels, but charges a lower monthly fee also.
This HD advantage is what IPTV providers must push for since IPTV is still a difficult sell for new customers. In fact, AT&T recently announced that it was offering free HD service for 1 year for new subscribers of its U-Verse service.
In the U.S. where cable competition and satellite competition is strong, IPTV service providers have to differentiate their services with HD including HD DVRs. They must also provide better quality than competing HD services. Also, satellite and cable providers have been known to scale back the HD bitrate which means potential quality problems that IPTV operators can exploit.
One thing that can help the economics of delivering HD is to lower the video bitrate. On the NAB exhibit floor, Grass Valley/Thomson was demonstrating its Mustang encoding chip which claims to deliver high-motion HD video at 4 to 5Mbps, which is about half the bitrate of current MPEG-4/AVC encoders that range from 8 Mbps and 12 Mbps. Lower bitrates means more HD channels for providers and consumers and that’s what everyone is after.
IPTV will lead the HD market based on MPEG-4/AVC—faster than cable or digital terrestrial. As providers switch to HD, MPEG-2 equipment will become obsolete. MRG research shows that revenue from MPEG-2 set-top boxes and headends will disappear by 2008 or 2009 and be replaced by MPEG-4 SD and HD equipment.
For more information about HD/AVC IPTV encoders and set-top boxes, see MRG’s new IPTV Global Forecast — 2007 to 2011, April 2007 or visit our website at www.mrgco.com/TOC_IPTV_GF0407.html.
For more information, consult our: MRG April 2007 IPTV Bulletin
Packet Vision Looks to IPTV Advertising
April 2007
With the success of many IPTV deployments, people are starting to ask: What about IPTV advertising? Packet Vision is answering that call by “providing targeting TV advertising to specific households via IPTV.”
Charlie Horrell, CEO of Packet Vision, says that the company’s technology supports local ad insertion, interactive and targeted advertising that can be tailored to match the demographics of individual households and even altered in real-time to reflect viewers’ reactions.
Founded in 2004, Packet Vision is a relatively new company and just recently announced its first customer trial in the US with Alaskan IPTV operator MTA.
Packet Vision’s ad server sits on the edge of the network, cuts in advertising and outputs 200 independent video streams. Aside from the hardware, the system also comes with sales and a traffic management software system so that providers can easily track and manage advertising campaigns.
Horrell said, “telcos are busy getting subscribers and are not focused on advertising much.” But as IPTV subscribers hit the critical mass, he believes providers will start IPTV advertising.
Packet Vision is interested in talking with everyone in the IPTV space, but is specifically looking at the mature European market such as France, Italy and Spain. But they are also interested in U.S. providers like AT&T and Verizon.
There are three types of data that can be gathered by Packet Vision’s technology: CRM information from the telco provider, the address or location, and tracking via IP tools such as channel changes and clicks.
Horrell said Packet Vision is using a “zero-risk, low capital investment model” which means the company will provide the server for free, in exchange for getting a percentage of revenues.
“One-to-one advertising hasn’t gotten very far. It’s more like one to many ones,” said Horrell. He says that viewers will see more relevant advertisements, which can prevent “channel hopping” and start new ad models for TV advertising.
Targeted advertising capabilities are great, but most service providers aren’t even selling conventional linear advertising yet.
“Most of the pieces of the jigsaw to turn IPTV into a mass revolution are in place, and the service that Packet Vision is providing will be the catalyst to turn opportunity into revenue for players in this market,” said Richard Scott George, GM of Packet Vision.
Servers and insertion devices are such a small percentage of the total cost of a system that we think that few system operators will trade off servers for a percentage of revenues. However, there could be a significant opportunity for a vendor that offers a complete, turnkey ad sales and delivery service, including hardware and software along with a qualified local and national ad sales force, in return for a share of ad revenues.
For more information, consult our: MRG April 2007 IPTV Bulletin
Iceland's IPTV Market
March 2007
Iceland Telecom (now called Siminn) says that it has deployed IPTV around the entire country with over 50% of its 52,000 DSL customers subscribing to the TV service.
In November 2004, Siminn launched its IPTV service in 10 towns around Iceland and by late 2005 it began offering full IPTV services with more than 60 channels, and VOD. Siminn is using Thomson middleware, Thales SmartVision broadband service platform and IBM servers.
For more information, consult our: MRG March 2007 IPTV Bulletin
Cablevision Loses Network DVR Lawsuit
March 2007
The U.S. District Court for the Southern District of New York ruled against Cablevision’s attempt to launch a network digital video recorder. Twentieth Century Fox, Universal City Studios, Paramount Pictures, Disney, CBS, ABC, NBC Studios, Turner Broadcasting’s Cartoon Network and CNN sued Cablevision in May 2006 claiming that its network DVR (called RS-DVR) would violate copyright laws.
The judge ruled that a remote-storage DVR would allow Cablevision and its customers to engage “in unauthorized reproductions and transmissions of plaintiffs' copyrighted programs.”
“The RS-DVR is not a stand-alone machine that sits on top of a television,” Chin wrote. “Rather, it is a complex system that involves an ongoing relationship between Cablevision and its customers, payment of monthly fees by the customers to Cablevision, ownership of the equipment remaining with Cablevision, the use of numerous computers and other equipment located in Cablevision's private facilities and the ongoing maintenance of the system by Cablevision personnel.”
Network DVRs lets users store TV shows on a provider’s network rather than on individual set-top-box hard drives. The judge ruled that recordings on a remote hard drive would be unauthorized reproductions.
The studios argued that because Cablevision was hosting the video on its servers, it wasn’t a network DVR, but a video-on-demand service and Cablevision needed permission to “rebroadcast” the programs.
Cablevision argued that its network DVR would not violate copyright laws since it works similar to DVRs in customers’ homes. In fact, Cablevision said it would dedicate separate storage space for each subscriber. In other words, if 500 subscribers decided to record the TV show “Lost,” there would be 500 separate copies saved on the Cablevision network.
Cablevision said it is reviewing the opinion and assessing all of its options, including an appeal.
Content providers are evidently trying to protect their content and possibly try to get TV operators to negotiate separate fees for implementing network DVRs. At the same time TV providers are trying to save money by deploying less expensive set-top boxes to customers and using their own network storage.
Meanwhile, the court decision is good news for TiVo, as well as set-top box makers like Scientific Atlanta and Motorola. As DVRs evolve and become more mainstream, however, it will be difficult to separate VOD from DVR functions. If Cablevision appeals, network DVRs in the U.S. may still be up in the air, however.
{Note: analyst comments are italicized}
For more information, consult our: MRG March 2007 IPTV Bulletin
Hawaii IPTV Service Launches
February 2007
NeuLion announced that its IPTV service was chosen by Hawaii IPTV for its Hawaii Television Network. Hawaii IPTV will deliver live and on-demand content consisting of various Hawaii programming including news, and other local TV shows.
Content is delivered over the public Internet, to the Hawaii IPTV set-top box ($150). Customers need a broadband connection to use the service.
The company said that the goal of the Hawaii IPTV service is to “deliver the Hawaii experience to Native Hawaiians and Hawaii expatriates living away from Hawaii.”
For more information, consult our: MRG February 2007 IPTV Bulletin
Ericsson and Arris Bid for Tandberg
February 2007
In late February, Ericsson made a surprise bid for Tandberg Television pitting it against Arris, which announced in January, that it was acquiring Tandberg for $1.2 billion. Ericsson upped the offer to $1.39 billion cash, which is about 10% more than Arris’ offer. Now it’s up to Arris to respond. News reports say that Arris is looking to make a counter offer, but nothing was announced so far.
Last month, Tandberg executives said they were backing Arris’ bid while calling the Ericsson offer "unsolicited." Still, if Arris does want to make a counter offer, it has to go through Ericsson since it owns a large percentage of Tandberg stock.
For more information, consult our: MRG February 2007 IPTV Bulletin
Mergers and Acquisitions
January 2007
Ericsson Acquires Redback Networks for $1.9 Billion
Telco giant Ericsson is acquiring edge router company Redback Networks for about $1.9 billion. Silicon Valley-based Redback has over 700 carrier customers in 80 countries and has some top-tier customers. Fifteen of the top 20 telephone carriers worldwide use Redback's technology, including broadband routers to manage IP-based data, voice and video services.
Arris and Tandberg Merge
Arris and Tandberg announced that they were merging at a deal valued at $1.2 million. The companies said by combining Arris’ VOIP equipment with Tandberg’s IPTV products they will accelerate the combination of voice, video and data products. According to MRG, Inc. Tandberg enjoys about 30% of the global IPTV video headend (encoder) market, with a strong position in Tier 1 and Tier 2 IPTV service providers.
Motorola Acquires Tut Systems for $39 Million
Motorola announced it was acquiring Tut Systems for about $39 million. Tut is a provider of carrier-class digital video encoding, processing and distribution products using MPEG-2 and MPEG-4 AVC video compression. It also provides local ad insertion, forward error correction, and real-time conditioning of video and audio.
For more information, consult our: MRG January 2007 IPTV Bulletin
Tiscali to Relaunch Homechoice as Tiscali TV
January 2007
Tiscali announced that it expects to gain about 500,000 U.K. subscribers in 2007 for its Homechoice IPTV offering. Tiscali acquired Homechoice TV when it bought Video Networks International in August 2006 and will rename the offering Tiscali TV when it relaunches later this year.
Broadband provider Tiscali has about 1.4 million U.K. DSL subscriber users and it hopes to convince more than half of them to add TV services. Tiscali said it plans to have over 80 TV channels including E4, MTV, Paramount Comedy and Cartoon Network, as well as 1,000 VOD movies.
In a survey commissioned by Tiscali of 1,400 users, 42% of respondents believe that today's traditional TV schedules will no longer exist in 10 years. Seventeen percent of users surveyed said they already watch on-demand TV, and 63% want to watch on-demand. Being able to watch movies at any time is so important to British consumers that more than half (51%) would prefer to rent a movie by downloading it through their broadband connection rather than go to a video rental store.
For more information, consult our: MRG January 2007 IPTV Bulletin
Time for Microsoft to Deliver
December 2006
Microsoft’s software deployments are starting to become commercial. Deutsche Telekom and Swisscom started their service in October 2006 and BT started its service in December 2006. AT&T’s service started in June 2006, but did not start to scale until the end of November 2006.
In addition, Verizon had to develop its own software (instead of using Microsoft’s) to support advanced functions such as whole home PVR in its FiOS TV FTTP IPTV service. Verizon uses Microsoft’s middleware for cable companies to manage channel selection. Since Verizon uses a cable like RF architecture for delivering broadcast channels, it does not use the same Microsoft IPTV Edition software that Deutsche Telekom, Swisscom, BT and AT&T do.
2007 will show how well Microsoft’s software operates. The first clue will be whether or not AT&T expands its IPTV service to 10 or more additional markets by the end of 2006, as it had previously promised. The real test will be to see the rate at which these services add subscribers. If these four IPTV services have 100 or 200 thousand subscribers between them by the middle of 2007, then Microsoft will be on its way. If not, then Microsoft may well see its market position slip.
For more information, consult our: MRG December 2006 IPTV Bulletin
Alcatel/Lucent Merged
December 2006
The Alcatel/Lucent merger completed with the resulting companying being called Alcatel-Lucent. The logo itself is the letter L and the letter A mapped into an infinity sign. Serge Tchuruk of Alcatel will be the Chairman of the Board and Pat Russo of Lucent will be the company’s CEO. The company stated that it will be the number one company in wireline, number three in mobile systems, and in the top three in applications and services. In the presentation it highlight its leading position in IPTV.
Alcatel-Lucent is the number one company in IPTV access systems, both globally and in Europe. It should be able to maintain that position.
It will be interesting to watch the Microsoft relationship. We believe that problems with Microsoft’s software have put a strain on this relationship. Alcatel’s recent video-on-demand patent suits against Microsoft is another sign of this strain.
{Note: analyst comments are italicized}
For more information, consult our: MRG December 2006 IPTV Bulletin
Hong Kong Broadband Flat
November 2006
City Telecom saw an in increase of 13 thousand IPTV subscribers for its Hong Kong Broadband Network Systems IPTV service bringing the total number of subscribers to 116 thousand at the end of August 2006.
City Telecom experienced a decrease in its total broadband subscriber base to 220 thousand compared to 227 thousand 12 months earlier. The company stated that it is upgrading its consumer business to less price sensitive and more service oriented customers. Consequently, its consumer broadband revenue increased 23 percent to $95 million.
For more information, consult our: MRG November 2006 IPTV Bulletin
Alcatel/Lucent Merger Approved
November 2006
George W. Bush, the President of the U.S., gave the final approval for the Alcatel/Lucent merger. This approval was based on agreements between Alcatel/Lucent and U.S. government security agencies. Alcatel’s current CEO Serge Tchurik will be the Chairman of the new company and Lucent’s current CEO Pat Russo will be the CEO of the new company.
This approval followed Congressional hearings addressing the U.S. security aspects of the merger. Lucent Bell Labs does significant defense related contracting with the U.S. government. Alcatel/Lucent addressed this by making Bell Labs a separate subsidiary following the merger.
Source: MRG November 2006 IPTV Bulletin
AT&T's Slow Start
October 2006
In its 3Q06 financial announcement, AT&T stated that it had 3 thousand U-verse IPTV subscribers at the end of September 2006. This is up from 1 thousand at the end of June 2006. It stated that it is getting a strong initial response with 85 percent of subscribers taking higher end video packages
AT&T also stated that its U-verse FTTN deployment passed 1.3 million homes at the end of the third quarter of 2006. It is forecasting 2.4 million homes passed by then end of the year.
AT&T is continuing to discuss a Houston launch with HDTV by the end of November 2006 and that it expects to launch about 15 markets within its territory by the end of 2006. It also stated that its initial market entrance and expansion will be deliberate.
Source: MRG October 2006 IPTV Bulletin
Verizon FiOS TV Booming
October 2006
Verizon made a presentation to the financial community to describe the current and anticipated returns from its FiOS FTTP deployment. It has been under pressure to explain why FiOS is worth the heavy investment that it is making.
Verizon is achieving 15 percent penetration of its FiOS service where the service has been available for at least 12 months. It is achieving a monthly churn rate of less than 1.5 percent. It stated that 70 percent of its FiOS subscribers are new to Verizon broadband.
By the end of 2006 Verizon will have two national super headends in operation along with nine regional headends. There will be 292 central offices supporting FiOS services. Verizon will also have video franchises in 300 municipalities that will cover 6.1 million households.
Source: MRG October 2006 IPTV Bulletin
Google Acquires YouTube
October 2006
Google acquired the Internet video content provider YouTube for $1.65 billion in stock even though YouTube had no significant revenue stream itself. YouTube reportedly attracted 57 percent of visits to Internet video sites in September.
YouTube’s popularity made it an attractive acquisition for Google. Google’s mastery over Internet advertising puts it in a unique position to capitalize on YouTube’s popularity.
Source: MRG October 2006 IPTV Bulletin
Free's First Half Results
September 2006
Free, the competitive carrier in France, announced its first half 2006 results. It now has 1.9 million broadband subscribers. It has 1.26 million TV enabled subscribers and had 273 thousand paying IPTV subscribers at the end of the half.
During the first half of 2006, Free introduced HD services and broadcasted French Open tennis matches in HD. It also introduced the ability to record and time shift TV programming on its HD Freebox set-top box.
Source: MRG September 2006 IPTV Bulletin
Shanghai Telecom IPTV Service
September 2006
Shanghai Telecom introduced its IPTV service together with the Shanghai Media Group (SMG). It stated that there are currently 10 thousand subscribers using this service. It expects the number of subscribers to grow to 80 thousand by the end of 2006 and 200 thousand by the end of 2007. It stated that this service will become profitable at 1 million subscribers.
This service will provide 58 channels, 12 from SMG, 15 from China Central Television (CCTV), 20 feature channels, and 9 from other provincial satellite sources. This service will include a time shifted TV service that will provide the ability to replay programs within 48 hours of their initial airing time.
The service will also include 3 thousand video-on-demand and pay per view services. Viewing a film will cost $.25 to $1.25. Viewing each episode of a TV series will cost $.038 to $.125.
For more information, consult our MRG September 2006 IPTV Bulletin
Market Leader Update
August 2006
MRG has just released the latest version of its IPTV Market Leader report. This shows which companies are leading globally and in four regions worldwide within in each of the six market categories we are tracking.
These ratings were based on ranking companies based on the number of subscribers in the 474 IPTV service providers that we have identified globally.
Mergers and acquisitions have had a big effect on these ratings. Tandberg’s acquisition of Skystream put it into a solid number two position globally and number one in Europe and Asia. Motorola’s acquisition puts it into the number one position in set-top boxes. The Alcatel/Lucent merger will put the resulting company in a strong number one position globally.
The conversion of in-house middleware packages to merchant status is the second major trend. PCCW’s Cascade subsidiary has sold its middleware package to True in Thailand. Converting the Cascade middleware to merchant status put it into the number one position globally.
Lucent has taken over the support of Telefonica’s in-house developed middleware software. Lucent is starting to aggressively market this software as a product, at least to Telefonica subsidiaries in Latin America.
The IPTV market is still forming. We expect that these ratings will continue to change significantly as the Market matures over the next couple of years.
{Note: analyst comments are italicized}
For more information, consult our IPTV Market Leaders Report - Sept. 2006
Source: MRG August 2006 IPTV Bulletin
Verizon Under Siege
August 2006
Verizon lost 4.2 million switched access lines in 2005, which is more than twice the 1.9 million switched access lines that AT&T, BellSouth, and Qwest lost together.
While AT&T and BellSouth have been successful in reducing the rate at which they are losing switched access lines in 2004 and 2005, Verizon took a big turn for the worse in 2005.
Verizon has very strong cable competition, particularly Cablevision in the New York area that has had quite successful VoIP offerings
For more information, consult our MRG August 2006 IPTV Bulletin
Free's Q2 Results
August 2006
The number of broadband subscribers at Free in France grew from 1.8 million to 1.9 million at the end of June. The number of IPTV capable subscribers grew to 1.4 million. The company now has 273 thousand subscribers paying for at least one IPTV service. Its subscribers have purchased 803 thousand video-on-demand features since it was introduce in December 2005.
Source: MRG August 2006 IPTV Bulletin
Cisco to Acquire Arroyo
August 2006
Cisco agreed to acquire video-on-demand system company Arroyo Video Solutions. This extends Cisco’s IPTV coverage into a new market segment and puts it directly into competition with Microsoft.
Arroyo has been focusing on the U.S. cable market and we have not identified any IPTV deployments. Arroyo’s strategy is to focus on personalization, which plays on a real IPTV strength.
The question now is what Cisco will do so that it can compete head-to-head with the Alcatel/Lucent/ Microsoft colossus. Middleware is the key missing element, but Content Protection/DRM is important as well. Cisco is an investor in leading Content Protection/DRM company Widevine.
{Note: analyst comments are italicized}
Source: MRG August 2006 IPTV Bulletin
Motorola to Acquire Broadbus
July 2006
Motorola announced that it would acquire Broadbus to round out its video offerings. Broadbus’ strong position in the U.S. cable market makes it a good addition to Motorola.
Broadbus is using its success with the cable providers to enter the IPTV video-on-demand market. It has 85 cable deployments and stated that it deploys with a tier one carrier in the U.S.
Broadbus uses solid state memory to distribute video-on-demand content from a central disk based library. It stated that it can support 100 thousand streams with six servers and 112 disk drives. Adding time shifted TV to this service would double the system to support 200 thousand streams with 12 servers. The number of disk drives would grow to 154.
The company states that the replacement of disk drives with solid state memory reduces facility costs such as power, space, and cooling by over 80 percent. It also states that its system will reduce the number of software upgrades by more than 90 percent. It has found that these savings can reduce OpEx by about 50 percent.
Source: MRG July 2006 IPTV Bulletin
Sky Offers Free Broadband
July 2006
It seems that offering certain components of an IPTV triple play offering for free is a common strategy. Free, of course, means that it is included in the base price of the bundle. Often a basic set of broadcast channels or VoIP services are offered for free.
In a new twist on this strategy, BSkyB, the satellite video provider is turning it on its head. It will provide a free broadband connection for subscribers to its video service. The range of services offered is given below:
Monthly Price |
Download Speed |
Monthly Allowance |
|---|---|---|
Free |
2 Mbps |
2 GB |
$9 |
8 Mbps |
40 GB |
$18 |
16 Mbps |
Unlimited |
This is a disruptive strategy that repositions BSkyB from a single play video provider to a triple play provider all at once. Its offer of a basic broadband service for free to all video subscribers will be very attractive to the mass market that has not yet committed to broadband. These people know they should have broadband and the ability to get it for “free” will cause many of them to make the move.
This is a direct challenge to the new BT service which is based on free digital terrestrial content and to its 21st century VoIP strategy. It raises the ante against the consolidating cable companies. It also makes it much tougher for the competitive IPTV companies such as Orange and Video Networks.
It seems likely that Sky in Italy will also adopt this strategy to fight off competition from Telecom Italia, FastWeb, and the new digital terrestrial services.
This is also a logical strategy in the U.S. Echostar seems to be exploring its own broadband alternative, including WiMAX technology. Echostar may well find an attractive broadband offering in the U.S. necessary to counter increasing competition from the cable and the IPTV companies.
{Note: analyst comments are italicized}
Source: MRG July 2006 IPTV Bulletin
AT&T Introduces IPTV
June 2006
AT&T introduced its U-Verse IP TV service to 5,000 homes scattered across San Antonio. It is priced at $69 to $124 per month with a family oriented bundle at $54 per month. A Spanish language package is available for an additional $10 per month.
AT&T offers over 200 channels along with a data service with speeds of 1.5 to 6 Mbps. The service comes with three set-top boxes, one with DVR capability. The standard installation fee is $95.
AT&T also introduced its Homezone service that combines Echostar video content with video-on-demand delivered over a DSL line to a 2Wire set-top box.
AT&T plans to introduce its U-Verse service in 15 to 20 markets by the end of 2006. It has not set a date for a full market launch in San Antonio or for any other market. It has stated that it will introduce the service in Houston, Texas.
{Note: analyst comments are italicized}
Source: MRG June 2006 IPTV Bulletin
Ericsson Introduces IPTV
June 2006
Ericsson introduced its IP TV offering at Globalcomm with a formal partnership with Kasenna who will provide its video-on-demand and middleware products. This offering will use Ericsson access systems and support broadcast and video-on-demand services.
In its next phase in 2007, the company plans to add IMS support to its IP TV offering in order to support both communications services and TV services.
The third phase of its implementation in 2008 will include convergence with mobile networks, including services that support both mobile and IP TV devices.
At Globalcomm, Ericsson showed a DLNA based demonstration with products from Sony.
Ericsson comes to the IP TV market later than the other major telecom suppliers such as Alcatel, Lucent, and Siemens. It faces the same problem as Siemens – it must overcome Microsoft’s dominance with large service providers.
Ericsson is taking a smart approach and leverage its mobile and IMS experience. It seems clear that mobile technologies will be increasing in IP TV networks, and Ericsson is well positioned to take advantage of that.
{Note: analyst comments are italicized}
Source: MRG June 2006 IPTV Bulletin
Siemens and Nokia to Merge
June 2006
Siemens and Nokia became the latest pair of major telecom suppliers to announce a merger. This follows hard on the heels of the Alcatel/Lucent Merger announcement in April 2006.
Nokias Networks division will merge with Siemens Carrier division. Both of these organizations offer Wireless and Wireline services and have aggregate revenue of €15.8 billion. They stated that 78 percent of these revenues are from wireless networks and 22 percent from wireline. The companies expect cost savings of €1.5 billion.
The resulting organization will be owned 50-50 by each company and will be headquartered in Helsinki. Most of the top level executives will come from Nokia.
The companies included IP TV as one of the leading market segments that the combined company will address.
The merger will not improve Siemens position in the MRG Market Leader Report. We have not identified any Nokia products in the IP TV market segments that we track in this report.
We expect that the resulting company will continue to put a high priority on IP TV, given the importance of IP TV in the service provider market today.
This merger together with the Alcatel/Lucent and the Ericsson/Marconi mergers will put significant pressure on Nortel, Cisco, NEC, and Motorola, as well as smaller companies such as Tellabs, Fujitsu, and Hitachi to find merger partners.
{Note: analyst comments are italicized}
Source: MRG June 2006 IPTV Bulletin
Siemens IPTV Home Equipment
May 2006
Siemens offers a line of home gateways that support VoIP and WiFi. Siemens has found that 802.11g WiFi is not sufficiently robust for IP TV video traffic. The company does expect that 802.11n will resolve these issues.
Siemens stated that both power line and polymer optical fiber (POF) will be popular methods for networking homes for IP TV. POF is a very thin fiber strand that can be deployed by the home owner. It is unobtrusive and can be easily hidden under rugs or other places. POF does not have the interference problems found with either wireless or power line systems.
Siemens also demonstrated its Tango customer equipment network element manager. Tango can manage both Siemens and non Siemens customer systems. It provides the ability to log events, gather data, and configure home devices. It does not have heuristic systems that provide intelligent filtering that would facilitate managing large populations of subscribers (several hundreds of thousands or millions).
As we reported previously, Siemens is introducing a line of MPEG-4 AVC IP TV set-top boxes. Its low end box will come as an HD/SD or an SD only. These two units are basically the same, except that the SD only unit has less memory to lower its cost. Siemens expects that the HD/SD unit will be widely used in Europe and North America and the SD only unit will be used in Latin America.
Siemens also offers a somewhat larger unit that may have a hard disk included with it. Both of these units support both SD and HD.
The final pair of units are hybrid devices that support both IP TV and DVB digital terrestrial services. A hard disk is available and both of these units support both SD and HD.
Siemens is still on schedule for a September volume delivery of these units; however, any further schedule slips from its chip suppliers will cause their set-top boxes to slip as well.
Source: MRG May 2006 IPTV Bulletin
FastWeb IPTV Treading Water
May 2006
We met with FastWeb in Milan this month about a week after it announced its results for the first quarter 2006. It used this meeting to point out to the financial community that it is now a national service provider in Italy.
FastWeb described its geographic expansion which increased the number of central offices served from 304 in December 2004 to 800 today with the number of metro areas served growing from 14 to 130 at the same time. It now covers 45 percent of the households in Italy and about 70 percent of the enterprise fixed-line market in Italy.
FastWeb is now able to serve national enterprises, which makes it a significant factor in this market for the first time. Previously, it served local and regional business applications as well as consumers.
FastWeb won two large public networking applications in Italy based on its network expansion. The company stated that other large enterprises are starting to consider it to support their network deployments.
The company is continuing to aggressively go after the consumer market in Italy. It is using unbundled ADSL and ADSL-2+ as its primary technology for consumer applications.
FastWeb’s offers only SD video offerings at this time. It does not plan to introduce HD services in 2006. It expects that Italy will lag behind France and Germany in introducing HD services. Both of these companies are planning to introduce HD services in 2006.
FastWeb continues to increase its subscriber base, adding 80 thousand new subscribers in the first quarter of 2006. Its residential subscriber base is now about 675 thousand subscribers, with 160 thousand IP TV subscribers.
The number of IP TV subscribers has remained stable for the last couple of years. It had a successful promotion in 2003 based on the availability of football in its offering that generated a significant number of new subscriptions. Many of these new subscribers have cancelled their subscriptions and have been replaced by new subscribers. Increased satellite competition and new competition from digital terrestrial have also made it more difficult for FastWeb to acquire IP TV subscribers.
FastWeb’s overall customer spending continues a slow decline, primarily due to competitive pressures and the introduction of new services. FastWeb’s video customer spending is fairly stable with about a 3 percent decline in the first quarter.
FastWeb finds that there is less demand in the Italian market for higher speed data services. It is currently offering an upgrade from ADSL to ADSL-2+ for a one time charge of €80 and no increase in monthly fees. The demand for this upgrade has been modest.
FastWeb has no plans to upgrade its network beyond ADSL-2+ at this time. It expects that ADSL-2+ should support subscriber demands for HD services and higher speed data services. Telecom Italia has announced a plan to deploy VDSL, which may put some competitive pressure on FastWeb.
FastWeb’s first response to the Telecom Italia VDSL deployment will likely be to further promote its ADSL-2+ offering. This is a low cost approach that can provide an immediate result.
In the long run, it is likely that FastWeb will expand its FTTH deployment to counter VDSL. FTTH is technically superior to VDSL, which will give FastWeb a significant competitive advantage over Telecom Italia. FastWeb does not have the wiring cabinets located close to the subscriber that Telecom Italia has. These wiring cabinets provide the infrastructure for a fiber to the node VDSL deployment. A direct FTTH approach should be significantly less costly than trying to duplicate Telecom Italia’s fiber to the node VDSL approach.
The fact that FastWeb’s IP TV subscriber base has been flat for the last two years shows the difficulties that IP TV service providers are likely to experience as the competitive environment changes.
{Note: analyst comments are italicized}
Source: MRG May 2006 IPTV Bulletin
Deutsche Telekom Rollout
May 2006
We had two meetings with groups in Deutsche Telekom (DT) that are involved with its IP TV rollout. It had announced that it would deploy VDSL and IP TV in 10 cities in Germany in time to show the World Cup in HD in June of this year.
In May, it made the HD IP TV service available to several dozen friendly homes in time for the start of the World Cup. This is more of a technical trial than a market rollout. Current plans are to rollout the service commercially in these 10 cities in July.
While the VDSL rollout appears to be on schedule, all is not well with the Microsoft IPTV Edition Software that DT will use. We were told that it still does not operate reliably in the lab.
The public broadcasters in Germany, ARD and ZDF, are threatening to boycott the DT service. These broadcasters are protesting that Microsoft’s software is incompatible with some important European TV standards.
We also heard concerns that the Microsoft software does not provide sufficient opportunities for differentiation to permit DT to make a wholesale IP TV offering. There is some discussion that DT might deploy a second middleware platform for its wholesale customers.
In some good news for DT, the German Cabinet passed a bill that exempts DT’s VDSL network from unbundling, which will give DT a significant advantage over its broadband competitors and will give it a unique ability to provide HD IP TV services.
It does not appear that the DT IP TV network is ready for prime time yet. The technical issues with the Microsoft software clearly must be resolved. DT also has to resolve its content issues. It will clearly need all of the important broadcast channels from the start of the service.
{Note: analyst comments are italicized}
Source: MRG May 2006 IPTV Bulletin
OECD Rates Triple Play
April 2006
The European Organization for Economic Cooperation and Development (OECD) issued a report Multiple Play: Pricing and Policy Trends. This report looks at the pricing for bundled service that include voice, data, and video services. It includes an analysis of 25 European countries plus the U.S., Canada, Australia, and Korea.
The report identifies Free in France as offering the least expensive triple play package with unlimited voice calling at $33 U.S. Its analysis stated that a similar package from Comcast in the U.S. would cost $150.
The report also stated that Softbank in Japan offers the least expensive triple play package with per minute voice charges at $29 per month. The price for a similar bundle from Telefonica in Spain is $96 per month.
This report is dated April 7, 2006 and is available at: www.oecd.org/department/0,2688,en_2649_34223_1_1_1_1_1,00.html
Source: MRG April 2006 IPTV Bulletin
FastWeb Enhances Service
April 2006
FastWeb the competitive IP TV carrier in Italy announced several enhancements to its service in April.
FastWeb uses ADSL-2+ to deliver a data service that supports broadband data speeds of 20 Mbps downstream and 1 Mbps upstream. Existing broadband subscribers can upgrade to the new higher performance for a one time charge of €80.
FastWeb also introduced a network PVR service that it calls REPLAYtv that provides access to the previous three days programming on the free channels that it broadcasts. The REPLAYtv is included at no extra cost in its On Tv video on demand service, which costs €8 per month.
FastWeb also announced recent agreements with Sony, Columbia, and Paramount for additional video on demand content. This supplements the content that it now offers from Universal, Dreamworks, Medusa, Buena Vista, Disney, 20th Century Fox, Mikado, Rai Cinema, and Instituto Luce.
For more information, consult our Winning Content Strategies – May 2006 report.
Source: MRG April 2006 IPTV Bulletin
AT&T's Position
April 2006
Jeff Weber the VP who runs the IP TV project at AT&T stated at NAB that it will add 20 more markets by the end of 2006. It now offers 200 channels with video on demand in San Antonio today. It will use MPEG-4 do deliver video content. AT&T also stated separately that its San Antonio market trial would start in June 2006.
AT&T plans to add HD and DVRs in 2006 along with new set-top boxes and upgrades to its Microsoft software. It will also offer interactive features such as voting and games.
AT&T had stated last year that its market rollout would begin early in 2006. These announcements appear to be about a six month slip in AT&T’s IP TV service rollout.
{Note: analyst comments are italicized}
Source: MRG April 2006 IPTV Bulletin
Will AT&T Back Off IPTV
April 2006
inkEquity Partners analystAnton Wahlman believes AT&T will scale back its Project Lightspeed deployment, because its 25-megabit-per-second speeds will not be sufficient to compete with cable.
He believes AT&T will put greater emphasis on its Homezone joint venture with EchoStar that combines satellites to deliver broadcast content and DSL to download movies to a hard disk on the set-top box.
Wahlman believes that AT&T will launch IP TV services in a handful of cities, but will only pass about one-half as many homes as originally planned. He expects that AT&T will switch from VDSL-2 at 25 megabits per second to possibly faster versions of VDSL2 running on shorter loops with potential for as much as 100 megabits per second.
While Wahlman makes a good point, since AT&T’s VDSL strategy will not compete with cable’s DOCSIS 3.0, we expect that problems such as instability in the Microsoft software and the availability of MPEG-4 SD and HD set-top boxes may be significant in 2006. We expect that AT&T may slow down the announced pace of fiber to the node deployments announced in December 2005. Installing 3 million homes passed in 2006, 6 million in 2007, and 9 million in 2009.
{Note: analyst comments are italicized}
Source: MRG April 2006 IPTV Bulletin
SBC to Acquire BellSouth
March 2006
SBC has agreed to acquire BellSouth for $67 billion. After the merger the two companies will operate under the AT&T name with AT&T’s CED Ed Whitacre serving as chairman and CEO. BellSouth’s CEO Duane Ackerman will serve as chairman and CEO of BellSouth operations for a transition period following the merger. The deal is expected to close within 12 months.
It is not clear how this will affect the companies IP TV plans. We expect that AT&T will move forward with its Project Lightspeed. We expect that BellSouth will adopt the Project Lightspeed architecture, which may not cause much delay in its IP TV plans, since AT&T was already lagging.
This will have the biggest effect on companies that were expecting to provide equipment to support BellSouth’s IP TV deployment. It is likely that this will have a negative affect on Tellabs’ FTTC system sales.
{Note: analyst comments are italicized}
Source: MRG March 2006 IPTV Bulletin
Tandberg Acquires SkyStream
March 2006
Tandberg completed its acquisition of SkyStream. This merger moves Tandberg from number 4 globally to number 2 after Tut, which has a commanding lead due the large number of its deployments in small U.S. Telcos. Tandberg is now number 1 in Asia, number 2 in Europe, and number 2 in North America. Harmonic is number 1 in Europe and Tut is number 1 in North America.
{Note: analyst comments are italicized}
For more information, see our IPTV Market Leaders Report
Source: MRG March 2006 IPTV Bulletin
Alcatel and Lucent Merge
March 2006
Alcatel and Lucent have agreed to merge. The combined company will be number one globally in wireline and number two in mobile technologies.
The resulting company will be given a new name and will be 60 percent owned by Alcatel stockholders and 40 percent owned by Lucent stockholders. It will be headquartered in Paris.
This merger will give the resulting company the number commanding lead and the one position in the IP TV market. It will also be number one in Europe, number two in North America, and number five in Asia according to the numbers in our March 2006 Market Leader Report.
Achieving the number one position in IP TV is a good thing, but it is not nearly enough to justify a merger of this scale on its own. IP TV is one part of a full portfolio of wireline and wireline products and services.
{Note: analyst comments are italicized}
For more information, see our IPTV Market Leaders Report
Source: MRG March 2006 IPTV Bulletin
Mergers Close
February 2006
The mergers between Cisco and Scientific Atlanta, Motorola and Kreatel, Ericsson and Marconi, and Calix and Optical Solutions closed this month.
The Motorola/Kreatel merger had the most effect and moved Motorola into the number one position in the IP TV set-top box market as measured in our latest Market Leader report. Kreatel’s strong position in Europe complements Motorola’s strong position in North America.
The Cisco/Scientific Atlanta merger combines Cisco’s strength in the aggregation and backbone networks with Scientific Atlanta’s strength in headends and set-top boxes. While Scientific Atlanta helps Cisco in the cable market today, it should improve its position in the IP TV market as well by giving it the ability to address a broader set of IP TV network issues.
The Ericsson acquisition brings some benefits in the IP TV market, but does not significantly improve Ericsson’s position in this market. It does gain significant optical networking capability from the merger.
The Calix/Optical Solutions merger improves Calix’s position in the U.S. small telco market.
As we have said before, we believe that this is the start. Read about Tandberg and Skystream and the Nortel/Huawei joint venture below. We believe that these M&A activities will continue through 2006 and 2007.
{Note: analyst comments are italicized}
For more information, see our IPTV Market Leaders Report
Source: MRG February 2006 IPTV Bulletin
Who are the IPTV Leaders?
Feburary 2006
MRG’s new IPTV Market Leader report, now available, gives the position of about 60 different companies in four different regional markets and globally. These companies are grouped into six different product categories. MRG has added a new ranking system to thisreport for each of the 30 market sectors. The number one company in each global market and each product category are given in the table below:
IPTV Product Category |
Global Leader |
|---|---|
Access System |
NEC |
Video Headend |
Tut |
Video On Demand |
entone |
Set-top Box |
Motorola |
Middleware |
Thomson |
Content Protection |
Viaccess |
NEC is number one in AccessSystems due to its inclusion in the PCCW deployment in Hong Kong. ECI is number two globally and number one in Europe.
Tut remains the number one company globally and in North America in IPTV Video Headends due to its strong position in the U.S. independent telco market.
In Video On Demand systems, entone is the number one company globally and in Asia due to its deployment at PCCW. Alcatel is number two globally and number one in Europe.
Motorola is number one in Set-top Boxes globally as well as in North America and Europe due to its recent acquisition of Kreatel. Yuxing is number two globally and number one in Europe due to its inclusion PCCW’s network.
Thomson/Thales is number one globally in IPTV Middleware and in Europe, due to its inclusion in France Telecom’s network. Orca is number two globally and number one in Asia.
In IPTV Content Protection systems, Viaccess is number one globally and in Europe, due to its inclusion in France Telecom’s network. Widevine is number two globally and number one in Asia and North America.
This report is based on a database of 370 service providers globally that have some level of IP TV activity underway. More than 200 of these companies are small independent telcos in the U.S.
For more information, see our IPTV Market Leaders Report
Source: MRG February 2006 IPTV Bulletin
Tanberg TV to Acquire Skystream?
February 2006
Tandberg TV has signed an agreement to acquire Skystream. Both companies produce video headend equipment. Tandberg TV has been focusing on high end, high quality applications while Skystream has provided a more cost effective system. Tandberg stated that it was considering developing a system more like Skystream’s, but decided that acquisition was the better course of action.
Tandberg TV stated that it has focused on tier 1 carriers and that Skystream has focused on the tier 3 carriers in the U.S. This is consistent with the view of the two companies in our latest Market Leader report, but we have seen that Skystream does have a significant position in both Europe and Asia.
Looking at this merger from the perspective of this Market Leader report on a pro forma basis, the combination would retain the number two position that Skystream now occupies, still way behind Tut in terms of channels deployed. Skystream’s number one position in Asia would be strengthened significantly. The merger would put the combination into strong competition for the number one position with Harmonic in Europe.
While this merger clearly strengthens the position of both companies, it is not clear that it will be able to survive as a standalone entity over the long run. Video encoding is a specialized technology that will resist further combination, but the difficulties of integrating IP TV systems and the positioning for service provider business may generate significant pressures for further combination.
{Note: analyst comments are italicized}
For more information, see our IPTV Market Leaders Report
Source: MRG February 2006 IPTV Bulletin
Motorola to Acquire Kreatel?
January 2006
Motorola has agreed to acquire the Swedish set-top box manufacturer Kreatel. Kreatel is included in significant IPTV deployments in Europe that include Telefonica in Spain, TeliaSonera in Sweden, and KPN in The Netherlands.
Motorola stated that it was particularly interested in the set-top box APIs that Kreatel has developed as well as its hybrid set-top boxes that support both IPTV and digital terrestrial services. Motorola also expects the Kreatel development center to become an important R&D resource for its IPTV products and strategies.
This acquisition is in line with our predictions that M&A activity in the IPTV market will increase in 2006. This acquisition brings important technologies to Motorola as well as much better access to the European market. We have been saying for some time that Motorola needs to expand to the global market.
This acquisition will help Kreatel to scale to the next level. The large companies are taking most of the business from the large service providers today. Kreatel as part of Motorola will be able to compete more effectively for this business.
{Note: analyst comments are italicized}
Source: MRG January 2006 IPTV Bulletin
HD-DVD Group Looks Like They Dropped the Ball
October 2005
Anyone who’s watched the recent San Francisco 49ers game against Dallas (where SF led until the last seconds of the game) knows the feeling the HD-DVD camp must be feeling about now, since Toshiba and Paramount made their recent deal-breaking announcements. First, a little history…
Some months ago we predicted that HD-DVD would be the winner of the race against Blu-ray, based on three facts:
1. Reasonably-priced HD-DVD players were going to be ready by Q4/05 for the big holiday season.
2. HD-DVD is cheaper to build than Blu-ray.
3. At least half of the major Hollywood studios supported HD-DVD.
In the very serious business of format wars, the HD-DVD team looks as if it squandered the lead it had a few months ago. Since then, 2 of 3 of those facts have changed:
1. Toshiba (a leading HD-DVD manufacturer) said it would not be ready with HD-DVD players by Q4/05.
2. Paramount Studios has swung its vote to Blu-ray.
3. Also, Blu-ray came up with a standardized DRM that pleases Hollywood.
In addition to the Toshiba and Paramount announcements, another big change happened on the way to the 2005 Christmas tree: Sony got a new president, who realizes he cannot afford to lose this war, because if he does he also loses a big chunk of future PlayStation 3 sales (also based on Blu-ray). When someone is willing to bet the farm the way Stringer is, it tips the balance in terms of consumer acceptance through the branding war that is sure to ensue, especially if the competitor fumbles as did the HD-DVD Group.
Counterbalancing that, of course, is Microsoft and Intel’s recently announced support of HD-DVD. That makes sense from the perspective of PC sales and future Xbox sales. But …
Even with Microsoft’s backing, if HD-DVD players are not ready for Q4/05 holiday sales, HD-DVD loses its first-comer advantage. Although there are over 35 movie titles available on the HD-DVD format, those titles won’t make much difference if HD-DVD players are not available (reasonably priced or not) for the 2005 holiday season.
So the pendulum is swinging in favor of Blu-ray, unless the geeks from PC-dom can convince some more studios to reverse their support for Blu-ray. Remember, Hollywood still has more clout than Silicon Valley when it comes to content.
For more information about content strategies, see our IPTV Content Strategy Report.
Siemens Moving into IP TV Set-Tops
July 2005
Siemens will be introducing a line of Speedstream IP TV set-top boxes late in 2005 or early in 2006. They are currently trialing these products in Belgacom in Belgium and ADC in Thailand where Siemens is acting as the system integrator for IP TV deployments. With these two carriers the Siemens set-top boxes support Siemens’ Myrio middleware and Verimatrix content protection. Siemens plans to add support for the Microsoft IPTV Edition software soon.
Siemens is also a prominent supplier of DVB-T digital terrestrial set-top boxes in Europe. It has sold about 250 thousand of these units to date. Siemens is planning to introduce a hybrid DVB-T/IP TV set-top box for BT in the UK and Telecom Italia where these carriers plan to use DVB-T for broadcast channels and IP TV for Video On Demand services.
The Siemens IP TV set-top boxes will be introduced with MPEG-4 AVC. The units in its field trials today are based on DSP implementations. Siemens will be able to ship units in volume in January 2006 with a much lass expensive single chip implementation.
The entry of large manufacturers like Siemens and Motorola into the IP TV set-top box market are likely to attract a lot of interest. This will make it much more difficult for the small companies that currently are serving this market. In the long run, Siemens and Motorola will have to learn to compete in low cost markets like China and India if they are stave off a flood of low cost Asian products in the future.
Source: MRG IPTV Bulletin
For more information about the IP TV Tracking Service Subscription see IP TV Tracking Service.
Maybe Cable Should Cut a Deal
with TiVo for Program & Ad Data
March 15, 2005
The US Cable industry stands to lose a lot with the mandated
retail version of settop boxes, so we can understand why they're
fighting it.
Recently the FCC handed down a new ruling that requires all
integrated settop boxes be available through retail channels,
and that local cable support these boxes with the CableCARD
conditional access device.
If this happens, cable starts losing revenue through settop
box rentals and (potentially) through DVR rental fees ranging
from $4 to $10/ month. If retailers start including DVRs in
their boxes (as TiVo now does), cable could lose not just
revenue but control over the DVR, plus lots of potential data
about what programming people record/watch, and what ads they
watch or ignore. That data is very valuable to advertisers
and to cable operators looking to personalize program offerings
in a way that satellite competitors cannot touch.
For more about opportunities inherent in (cable-based) DVR-based
advertising and program tracking services, see US
MSO Triple-Play Service and IP Infrastructure Report 2005-2008
Cable Should Note TiVo's Hidden
Value
March 2005
Besides being a big success as a "lovable" consumer device
that owners can't live without, TiVo (the product) has some
other advantages that could spell upside opportunity for the
company-It's ability to track usage of programming and advertising
in a way that maintains consumer privacy.
By tracking what people record and how many times they watch
an ad (based on zip-codes, not households) -- TiVo sits on
top of a treasure trove of valuable data that could prove
invaluable to cable users looking to enhance their advertising
revenue.
In a recent study by MRG of the top 8 MSO (cable operators)
in the US, tracking usage and discovering a better way to
personalize promotions were top priorities for the cable operators
to develop, even though they are doing little about it at
the moment. This seems like a strong opportunity for TiVo
(the company) to take the lead in standardizing and developing
better ways to make advertising on demand and programming
on demand available to consumers who already have voted with
their remote control.
For more info, see US MSO Triple-Play
Service and IP Infrastructure Report 2005-2008
Why HD-DVD Will Probably Win the HD Format War
February 2005
How a Standard HD Format Impact the Demand of HD in Triple-Play
One thing that will help HD (High Definition) content demand
in U.S. satellite, cable and Telco TV markets is the emergence
of a standard disk format for consumer viewing of High Definition
movies. When prices hit the $300-$400 point for a player (still
a few years away) and under $1,200 for a 42” flat screen
display, the mass market forces will push demand up significantly.
First however, the U.S. consumer electronics industry must
have a single viable standard for a High Definition DVD player.
The two major contenders are Blu-Ray (sponsored by Sony, Panasonic
and others) and HD-DVD (sponsored by Toshiba, NEC and others).
Table — Comparison of two HD format
| Blu-Ray | HD-DVD | |
| Compatible with | Not Naturally Backward Compatible with DVD | Is Backward Compatible with DVD |
| Component Costs | Higher, due to multiple read heads | Lower due to single read heads |
| Manufacturability | Pending | Demonstrated by Toshiba |
| Hardware Suppliers Support | Dell, Sony, HP, Hitachi, LG, Matsushita (Panasonic), Philips, Pioneer, Samsung, Sharp, TDK, Thomson | Toshiba (Japan), Memory Tech, NEC (Japan), Sanyo (Japan). |
| No. of Titles Released | Sony Titles; some old MGM titles; Buena Vista ; (+ Fox) | Est. 300 + by Q4 05 Paramount, Universal, WB, New Line Cinema, HBO (+Fox) |
| Content Protection | Satisfactory | Satisfactory |
| Capacities | 25 GB — single layer; 50 GB — double layer | 15 GB single layer 30 GB Double Layer |
| Studio Endorsement | Sony, Disney | Universal, Paramount, WB, New Line, HBO |
| Compression formats | MPEG2, MPEG4, VC1 | MPEG2, MPEG4, VC1 |
Looking at the Studio support that each new High Definition
(Blu-Ray HD-DVD) format has lined up to date, it appears that
HD-DVD has the advantage of getting the most major studio
endorsements (two for Blu-Ray five for HD-DVD). Because the
number of available recent movie titles and the cost of the
player are the key determinants of a DVD format’s success
— as it was in 1997 with DVD — the basic numbers
add up to favor HD-DVD at this time. Because movie studios
supporting HD-DVD already add up to about 45% and Blu-Ray
supporters represent 36% of the U.S. home movie market, a
few more studios supporting HD-DVD it would put it well in
the lead. For example, Fox, if it supports HD-DVD will put
that format firmly in the lead with its 11% of the market.
Because of the importance of price to consumer for the DVD-Player,
the proven manufacturability and the relatively lower cost
of the HD-DVD also argue in favor of the HD-DVD. (If Fox decides
to endorse Blu-Ray, a prolonged stalemate will likely follow.)
How DVD standardization works
In late 1997, we at MRG, Inc. did research on available DVD
titles in the U.S. for the Q4/97 Holiday Season to determine
whether DVD (the original Standard Definition DVD format)
would survive as a movie format. After all, there was genuine
fear that a standardized DVD format would never survive, given
the market failure of the earlier Laserdisc format. We discovered
over 400 titles were available by late 1997 — many time
more than the number a year earlier. That was the year that
turned the tide for DVD players, despite some high prices
($1000/player unit) and incompatibilities between some vendors’
DVD players. Currently, HD-DVD doesn’t appear to have
interchangeability problems like this.
We estimate that chances are very good that HD-DVD will have
well over 200 major movie titles available by Q4/05 (not counting
“adult” and “how-to” titles), so that
it can declare itself the winner. We suggest the concept of
a “merged” HD format (promoted by Blu-Ray to overcome
backward incompatibility problems) will raise costs, resulting
in a slow down of deployment. Q4/2005 or Q4/2006 will be the
big launch dates for the winning format, depending on how
many other studios pledge support, and how far below $1000
initial mass-market player prices go. (Blu-Ray players have
been selling for about $2,000 and above in Asia as late as
Q1/05; HD-DVD is targeted below $1,000 for release in Q1/2005).
Blu-Ray’s Niches
Meantime, we believe Blu-Ray, with its higher capacity and
higher costs, may well become an industrial format for enterprise
and Media Asset Management (MAM) in broadcast operations and/or
as a high-end interactive video game format. In broadcast
production recording equipment alone, Sony is already the
leader. Just as Sony catapulted the original Betamax tape
format (the failed consumer VCR format) into Betacam (the
world’s most successful professional video tape format
for over 2 decades), we expect Blu-Ray will be leveraged into
a highly successful video/film production format that scales
to quality capacity levels not reachable by HD-DVD. Sony is
not likely to give up its hard fought and long range dominance
in the professional video/film production business, and it
rarely has placed bets on new formats with only one market.
So we believe Sony and its multitude of manufacturing partners
will develop the Blu-Ray format for high-end video production
and data storage enterprise storage, and high-end game applications.
PC Following the TV
The consumer market, on the other hand, will go with the format
that gets the most cooperation and endorsements from the large
and mid-sized movie studios and distributors, and with the
lowest manufacturing costs (given the quality is noticeably
better than Standard Definition DVD). Effectively, the studios
will have to decide by mid-2005 on which format they will
release the most titles. Remembering that High Definition
viewing is still a “lean-back” experience, the laptop
versions of HD-DVD recorder/players will follow what happens
in the consumer living room, and not drive it as some PC manufacturers
like Dell and HP believe.
For more information about HD in IP TV video services, see
our IPTV Video Market Tracking
Service; for more information about the Media Asset Management
(MAM) Industry, see Digital Media
Asset Management & Workflow Management in the Broadcast
Industry: Survey & Analysis 2004. For more information
about HD deployment plans in the US Cable Market, see U.S.
MSO Triple Play Service & IP Infrastructure Report - 2005-2008.
Observations from the 2004
TelcoTV Show, Orlando, Florida
November 2004
Over 900 small independent telephone operators (IOCs) dominate the US IP TV market for now, especially during the quiet period before the large RBOCs get their IP TV programs off the ground (realistically, sometime in 2007). Many of these IOCs were present at the TelcoTV 2004 Show in Orlando, Florida in mid-November; and show organizers reported significant growth in attendees and exhibitors over the 2003 Show.
Integration
Integration was one of the major themes of the show. How much
does integration factor into the price of TelcoTV (or IP TV
as we call it)? If vendors have any thing to say about it,
it figures a lot. Upgrading to IP TV and triple play isn’t
like just swapping out some Set Top Boxes (STBs). Almost all
of the VOD vendors, Video Headend (VHE) vendors and middleware
vendors are offering integrated solutions with other pre-qualified
and pre-interfaced components. Yet, one of the big questions
operators are asking is “generally how much per service
or stream should it cost me, including maintenance and operation
costs?” The age-old ROI questions keep coming back to
vendors, especially ones who are offering pre-integrated packages
(sometime called turnkey solutions) using multiple suppliers.
The vendor who can answer these questions responsibly, we
believe, will be well received.
Companies like Alcatel, Siemens, Entone, Optibase, Paradyne,
UTStarcom, Tut, Tandberg, RGB, Ciena, and Skystream Networks
all have new integration stories to tell. Integration Services
differ greatly from Tier 1 Carriers to small IOCs. For Tier
1 Carriers, we are told, an integrator bids on the best deal
with each vendor that the carrier has pre-specified, meaning
that the integrator does not bundle products that it chooses,
nor does it provide installation. For small IOCs, on the other
hand, integration services may well include identifying and
bidding on all the necessary elements in addition to installation
and a possible maintenance component.
Content
Content is still king was another major theme of the
show. How well an IOC can negotiate for content, according
to one supplier, can be the major determinant in whether the
IOC’s subscribers churn or not. Content developers also
attended the show, because they want to participate directly
with IOCs in the emerging IP TV market.
Content Protection/ Digital Rights Management (CP/DRM)
CP/DRM is on the minds of many operators, as they face
the reality of lengthy contracts required to acquire new content.
While this isn’t stopping IOCs from negotiating with
content owners, but they are making greater effort to understand
requirements and to hire appropriate attorneys to assist them.
In one exhibit booth, Widevine (a content protection vendor)
was being shown as an integrated package with Tut Systems,
maker of video headend systems.
Content--Games: Part of the content news is the increased
interest in games. FastWeb (the showcase IPTV service from
Italy with over 450k triple play subs and 160k IPTV subs)
states that game play (with no prizes) is a popular enough
niche service to be able to generate steady revenue (@ 3 Euro
for 10 games played). Since no prizes are used other than
allowing the grand winners to post their names on a regional
server, FastWeb believes that games can provide enough “stickiness”
to make this service an ongoing and consistent revenue generator
for extended periods. Another example is talking games for
children, as put out by Sesame Street. These have high appeal
to parents and their pre-school children (still too young
to read). ICTV, a services software vendor, offers game clusters
like Sesame Street and others to the delight of children,
who can interact using a child-sized remote control (or one
that matches their level of hand-eye-coordination).
Vendors insist that these games are not meant to compete with
the video games found on Xbox or Playstation2, and there is
no real intent to try to compete with the speed of these platforms.
Where multi-player online games are offered, the high-speed
bandwidth-hogging games will not be offered, unless there
is excessive 2-way bandwidth available.
Localized Content: Insert (local) advertising and local
content draw high interest from IOCs. Since local content
helps drive down churn and local advertising drives up revenues,
localized content acquisition and distribution will remain
a high priority for US IOCs, as it is for their competition,
the US cable operators.
Edge Servers/ “Push” Video
DVR-centric Push-Video & Edge Servers: Migrating the DVR/PVR
to the home as part of the IPTV service (as we reported in
September, 2004, from the IBC floor in Amsterdam) is another
new wrinkle in content distribution. No one questions that
the DVR will play a role in keeping down churn and in helping
to shift users’ preference toward on-demand viewing from
linear channel viewing. But if vendors like Encoda or Skystream
Networks have anything to do with it, pushing the video to
the DVR (almost MovieBeam style) in a secure fashion using
fresh content (such as new movies) has a lot to offer, given
the diminishing cost of storage. We have stated in the past
how we believe push-video concepts like Disney’s Movielink
(using recent releases from 5-10 studios, and using unused
bandwidth or spectrum from low usage periods) holds significant
promise. Telco TV operators will also do well to watch US
cable operators as a model for how PVR/DVR centric “push-video”
can become a common offering in the IPTV business using FOD
(Free-on-Demand Video) to “push” new releases and
services.
Because of localized service needs, content distribution and
service distribution to the edge, we believe, will become
more common. Virtually all servers on exhibition accommodate
the MPEG4/AVC, WM9/VC-1, and MPEG2 codecs at multiple bitrates
simultaneously. Similarly, IP Settop Boxes (STBs) can usually
decode all three major codecs, meaning a standards war will
not inhibit market penetration.
Conclusions
The lines are blurring between triple-play for IOCs and for
Cable operators in the US Market. In on-demand services, all
major vendors are showing applications for telcos that rival
those of cable. For example, VOD vendors Concurrent, Kasenna,
and Seachange are offering to support multiple (IP-based)
services to both MSOs and IOCs (as well as RBOCs). Insert
advertising, video, and games, for example, can be co-located
on the same (IP) platform, allowing for multiple-services
(ads, games, MOD, SVOD and FOD) to be provided on the same
low-cost IP-based servers using distributed architectures.
To do this successfully requires highly integrated systems
that can provide measurable (and accurate) ROI analysis.
Today’s IOCs compete in a multi-service (triple-play)
and increasingly on-demand environment that rides on the globally
accepted IP standard. The presence of this standard means
that market changes will occur faster, and costs will go down
faster than any operator faced even one decade ago. This new
development spells new opportunities for both IOCs and Cable
operators who can adopt quickly to new (localized) opportunities
presented by globally standardized IP and compression technologies.
Using DVRs for Ad Revenue
To Skip or Not to Skip
July 2004
The question of whether to add an ad-skipping function to
the DVRs is being debated as recently as the latest NCTA conference
in New Orleans by the major U.S. cable operations (MSOs).
We suggest that cable operators not install a (free) skip
button, but do everything possible to implement multi-speed
fast forward (FF) and rewind (REW) in their DVRs. Since DVRs
already are known to reduce churn in experimentations done
by MSOs, the FF functions should be enough for consumers to
appreciate the value of time-shifting without totally ignoring
the advertisers who provide significant revenues to the cable
industry. In other words, the skip function should not be
enabled unless some kind of “premium” service is
purchased (e.g., a SVOD subscription to a whole series).
Since research indicates that DVR owners watch more total
TV after getting a DVR, the odds increase that the DVR owner
will also see more ads in the process. Even in a FF mode,
ad messages can be embedded so that viewers are aware of the
advertisement on a “sponsorship” level without actually
seeing the full ad.
Anonymous Zip-Code Monitoring
By collecting information on which ads and programs are watched
(and re-watched) — on a zip-code level — the DVR
can add significant value to the advertising service while
not violating privacy concerns of individual viewers.
For more information about bundling and pricing of Cable Telco
services, see the reports Triple
Play vs. Home Run/Telco vs. Cable: The Battle for the Multi-Services
Market and IP TV
Business Case and Global Forecast 2004 to 2007.
The European Free Multichannel Trend, Under the Influence
of Rupert Murdoch,
Can Happen Here
SVOD and Digital Tiers May Come faster to Cable than Expected
July 2004
For those who believe free satellite multichannel can’t
happen here in the next 10 years, we only have to look at
the 3.5 million people who have signed up for such a service
in Europe to get a glimpse of how it works.
The DTH (Direct—to-Home Satellite) or DTT (Digital Terrestrial)
basic service (15-30 channels including local) are offered
for free. Subscribers get a free box and antenna (if needed)
installed.
— Once the subscriber is hooked on the free service,
the Service Provider offers a steady stream of “on-demand” pay services.
Rupert Murdoch’s B Sky B and the UK - based independent
stations are already doing something like this. And in Berlin
(and soon Frankfurt and other German cities), a similar offering
will be available and poised to grow using aggregated spectrum
from the DTT broadcasters.
U.S. Cable and Telco operators will want to monitor closely
what satellite is doing in promoting free channel tiers with
DVRs and PPV movie services. By increasing its effort to appeal
to current free-to-air (non-multi-channel) subs and to “basic
analog” cable subs, U.S. Satellites will soon present
a new level of competition in multi-channel video services.
It is quite possible that Mr. Murdoch could force cable to
do the same as part of its Triply Play offerings.
For more info on Triple Play for Cable & Telcos, see Triple
Play vs. Home Run/Telco vs. Cable: The Battle for the Multi-Services
Market.
Can Comcast
Really Absorb Disney?
February 2004
What makes Comcast special? Why do they suddenly have the
ability to offer to buy up Disney with a $50 billion price
tag? Is there a reasonable chance that they can raise the
funds?
We say yes, they probably can, because Wall Street likes them
a lot, especially since Time Warner has had its problems.
It was only a year ago that they began to absorb AT&T,
and they have done it well. Wall Street likes that.
Another reason that Wall Street likes Comcast is its ability
to move quickly and change their course on some new technology.
Comcast is like Microsoft in that sense. If you recall, in
December 1995 Microsoft turned on a dime from having a lukewarm
(or non-existent) Internet strategy to having a company-wide
program by early 1996. The reason was its ability to move
quickly and make the necessary internal adjustments to make
it happen.
Comcast has turned on a dime with its deployments of DVRs,
Cable Telephony, and VOD service. They have the ability to
do internal restructuring and to refocus capabilities, traits
highly uncommon in a large company. In late 2003, Brian Roberts
also turned on a dime about DVRs, first calling it a "Napster
device for video," then later announcing DVRs as a centerpiece
of Comcast’s digital upgrade program.
Roberts realized he was wrong the first time and reversed
not only himself but some key parts of his company. That's
another reason why Wall Street has confidence in his leadership
of Comcast.
For more information about cable’s new digital services,
see Triple Play
vs. Home Run/Telco vs. Cable: The Battle for the Multi-Services
Market or Home
Gateway Report: Worldwide Multi-Carrier Digital Settop &
Services Analysis & Forecast 2003-2006 reports.
Forced Video Buy-Through
by Cable a Dangerously Flawed Strategy
January 2004
A recent article in CableFAX’s CableWORLD comments
on the subject of forced video buy-through in an article “The
Future of Programming.” It states, “Cable is systematically
abandoning the programming high ground to satellite competitors.
(Even to the point of not understanding the backward thinking
of forced buy-through to get to wanted tiers.)”
The article puts its finger on one of the most important inflection
points in today’s multi-channel broadcasting business.
Cable operators are reluctant to forego the policy of requiring
subscribers to buy unwanted tiers to get to the wanted tiers.
To do so means entering the competitive waters of offering digital
tiers (news, sports, home care, etc.) to reach niche audiences
the same way magazines have had to do for decades (once Life
and Time magazines ceased to dominate).
Our research (about triple-play and bundling strategies for
both Cable and Telco/Satellite Companies) shows that MSOs who
offer small digital tiers with a SVOD option (similar to what
Cablevision is doing) without forced buy-through can actually
strengthen an their video services positioning against satellite.
If Cable doesn’t abandon forced buy-through, satellite
(and its friends the RBOCs) probably will.
For more information about bundling and innovative Triple-Play
Strategies, see Cable
Bundling Report 2004and Telco
Bundling Report 2004 from our new Triple-Play Series of
reports.
Disney's MovieBeam Shows Promise as a New Movie Service Not Dependent on Satellite or Cable
But Big Success Rides on its Branding Ability and Integrate-ability with other Set-top Boxes
October 2003
MovieBeam looks like one of the first standalone Movies
on Demand Consumer devices that goes beyond technical wizardry.
Because it is compatible with both (current) analog and
(soon-to-be dominant) digital terrestrial TV signals in
the US, the MovieBeam has the potential to become an easy
way to bring the video store into your home at a competitive
cost.
Having no ties to or axes to grind for or against Disney,
we believe this approach has a better-than-average potential
for changing the movie-rental business model and for enhancing
the revenues of the local broadcast stations (by using spectrum
in low-use hours). Sometimes called “opportunistic
downloading”, the exploitation of unused broadcast
spectrum for distributing movies has been around for a while.
What is different this time is that attractive movies will
become available on a low-cost device (having a core library
of 100 movies with 10 new ones added each week) that is
about as easy to install or use as a DVD player. Furthermore,
the rental price is competitive with your local video store;
and this is a great way for Disney to leverage its ABC (owned
and affiliated) TV stations.
One problem still exists—that of integrating the MovieBeam
with other STBs (set-top boxes) like DVD players, PVRs (Personal
Video Recorders) and Digital (multichannel) receivers. Again,
as with PVRs, MovieBeam will probably hit a wall of consumer
indifference after making a hit with the early adopters
(who already know how to route all their video devices through
a video switch). Another potential problem is the monthly
subscription price (about $6.00), which can be dealt with
over time.
However, the mass-market success will come through excellent
branding and product integration with other set-top devices.
As the MovieBeam brand gets known, MovieBeam, too, will
get integrated into other Home Gateway devices along with
VOD and DVD-R and multi-channel STBs (similar to what is
happening with PVR-integration today).
For more information on worldwide Set-top box, digital Cable
and Telco TV markets, respectively, see Worldwide
Multi-Carrier Digital Settop & Services Analysis & Forecast 2003-2006, IP/Broadband
Video Business Case and Global Forecast 2003-2006, and
Home
Gateway 2002: Worldwide Cable Market Forecast.
©2003 MRG, Inc.
What was Kudelski thinking when it bought Thomson’s MediaGuard Conditional Access (CA) Software?
Is it time for an International CA Standard?
August 2003
In the recent announcement of Kudelski to acquire the MediaGuard
CA (Conditional Access) software from Thomson’s CanalPlus
subsidiary, more questions were raised than answered.
The latest marriage between the CanalPlus/MediaGuard is
not necessarily one made in heaven. Kudelski’s conditional
access software (called Nagravision) has had far more good
press than MediaGuard has, which brings with it some negative
market perceptions dating back to the (now dismissed but
not-forgotten) lawsuit against NDS (a third large international
CA supplier owned by News Corp.). Will the Kudelski engineers
embrace the MediaGuard engineers as if their own? Will MediaGuard
truly enhance the Kudelski CA product? Will Kudelski customers
and prospects embrace the MediaGuard product line?
The real logic driving the acquisition is that both Kudelski
and Thomson need to penetrate more Asian, European, and
North American markets. The current leaders in conditional
access include NDS, Scientific Atlanta, Motorola, Irdeto,
and, Kudelski/CanalPlus - a very crowded market indeed.
This all wouldn’t really matter so much if there were
a global standard for Conditional Access similar to the
widely accepted SSL and S-HTTP standards* for secure online
E-commerce on the Internet. Maybe a similar move would help
the struggling ITV industry gain traction in broader markets.
For more information about the global digital TV, ITV, VOD,
DVR (Digital Video Recorder) markets for Cable, Satellite,
Digital Terrestrial, and Telco service providers, see these
reports: Worldwide
Multi-Carrier Digital Settop & Services Analysis &
Forecast 2003-2006 and IP/Broadband
Video Business Case and Global Forecast 2003-2006.
*SSL and S-http are both approved by the Internet Engineering
Task Force.
(Note: For more information about global market and product
planning services from MRG, see the 360
Partnership Program and Custom
Research Program).
©2003 MRG, Inc.
The New SBC/EchoStar
Bundling Relationship
A Very Cheap Date for SBC
July 2003
In mid July 2003, SBC announced it will co-market EchoStar
video services in early 2004 and will develop a new Set-top
Box (STB) to handle the bundled services. For this, SBC
will set up a $500 M bond that it can convert into EchoStar
stock.
We believe strongly that the major U.S. ILECs (Incumbent
Local Exchange Carriers) need to respond to the triple play
threat from the cable industry. With only two cable MSOs
(Multi-system Operators) broadly marketing cable telephony
services today, the cable companies have gained 2.5 million
subscribers. With the rest of the cable industry about to
enter this market, SBC needs a triple play threat of its
own. SBC is rounding out its voice and DSL offerings with
a video offering from EchoStar.
But going to the prom with an Incumbent Telco is far different
from getting married. Technically, the task of integrating
the transaction processing elements of video services with
the SBC billing system, and with new STBs, are very big
tasks. If SBC really wants to compete with cable’s
triple play, it will have to consider a bigger commitment
than a small $500 M convertible debt investment that it
can convert to stock at will.
For more information on the Telco Video Market, see IP/Broadband
Video Business Case and Global Forecast 2003-2006. For
more information on the global Triple Play and STB Markets,
see Worldwide
Multi-Carrier Digital Settop & Services Analysis &
Forecast 2003-2006.
©2003 MRG, Inc.
Why is it so Hard for Outside
STB Manufacturers to Integrate with Legacy Systems?
July 2003
Broadening Global Opportunities Help Raise Bar for New Entries
Companies like Pace, Sony, Pioneer, ADB and others have
been eyeing the North American Digital Cable Set-top Box
(STB) market for about a decade. Additionally, the Cable
Operators have for over a decade expressed frustration with
the proprietary nature of “the duopoly”, (i.e,
Scientific Atlanta and Motorola, previously General Instrument),
deploring the high costs of using proprietary technology
owned by the duopoly.
Legacy Complexity Harder Than it Looks
Besides the subtle integration elements of EPG displays, Conditional Access, and even VOD deployment required of new STBs, the complexity of each cable headend also dates back to what billing system is used, and a host of other system control features and functions supported by the local headend. Therefore, selling into a new cable system requires huge investments into system integration, product innovation, and maybe even product co-development with a competing STB manufacturer.
Niche STB manufacturers can no longer survive in the developed
TV markets, due to the globalization of standards and the
expectation of lower costs by subscribers and cable operators
worldwide. With the globalization of many standards for
digital cable, satellite, and even digital terrestrial broadcasting
brought on by standards groups like DVB, CableLab,s and
MHP, regional players have no choice but to compete in the
global market. As China opens up more of its cable business,
we expect more of China to also open its doors to outside
competition, meaning tomorrow’s STB manufacturer will
have to offer regional and local options much like PC makers
or cell phone makers do today. In 5-10 years, far more customers
will be owners of their own STBs than today, and they will
pay for features or channels much as phone customers do
today. The globalization of the STB manufacturing will create
even more competition for the Big 5, as the era of Home
Media Centers become mainstream and consumers have more
control about which channels and services they pay for,
as determined by the capabilities of their STB. Still, to
the contenders that want to go in for the long haul, the
market opportunity still exists.
To find out more about the global opportunities movement
in Cable, Digital Terrestrial, and Satellite, see Worldwide
Multi-Carrier Digital Settop & Services Analysis &
Forecast 2003-2006.
©2003 MRG, Inc.
Why High Definition TV (HDTV)
May Take Off in 2003-2004
July 2003
Plug-and-Play Initiative Will Help Eliminate HD’s Chicken-and-Egg Problem
Recently, the U.S. FCC Media Bureau got an ear-full from
CE manufacturers on the Plug-and-Play initiative, which
promotes making new DTV sets HD (High-Definition) and Digital
Cable-ready. The FCC’s renewed interest shows that
it may, indeed, ratify the technology proposal put forth
by the CEA and NCTA in late 2002.
Because the price of HDTV displays (currently not enabled
to receive cable or off-air HD/digital TV) has gone down
to the $1,500 mark for sets of 42” diagonal size and
above, consumers can (and have) begun to seriously look
at upgrading their main TV sets with a larger wide screen
displays. Recent sales figures confirm this, with Q1/03
(Jan-May) sales of DTV displays being 1.1 million units
or 56% more in that size and price range than the same period
last year. With an average price to retailer of about $1,374,
(according to CEA), this trend shows that U.S. consumers
are moving to large wide screens with the anticipation that
more HD fare will be coming from cable, satellite, and local
broadcasters. Another indicator that retailers are excited
is their switch to showing true HD in their showrooms (i.e.
fed with a full HD source, not just a stretched standard
definition stream). The picture-quality difference is enough
to stop browsers in their tracks and take a close look.
Chicken-and-Egg Dilemma Morphs into Omelet
The plug-and-play agreement emerged from the CEA and NCTA
in late 2002 as a means of making DTVs easy to hook up (right
out of the box) for basic digital cable service and to receive
local (off-air) digital broadcasting without the use of
an additional set-top box (STB). TV manufacturers such as
Thomson and Philips have both been promoters of the new
standard because they don't have much at stake in the cable
STB business. (Both Thomson and Philips have STB products
available for satellites.) We believe the FCC will ratify
the plug-and-play, meaning the chicken-and-egg problem of
not enough HD receivers to justify widespread HD programming
and advertising will disappear at a faster rate than before
4 Wheels of HD
Since most Americans receive TV from cable operators, "Plug-and-Play"
should play a major role in HD's success. Remember, however,
that HD "rides on the 4 wheels" of cable, satellite, digital
terrestrial, and DVD distribution. If one of those wheels
(e.g. DVD) isn't working right, growth will be slower. For
more about the 4 wheels of HD and how Plug-and-Play will
impact DTV sales see Worldwide
Multi-Carrier Digital Settop & Services Analysis &
Forecast 2003-2006.
©2003 MRG, Inc.
June 2003
Recently one analyst was found wringing his hands about the potential death of the ITV industry if it didn’t upgrade its industry image.
We don’t think there is an ITV industry to start with. ITV at best is a function, which may or may not catch on as a revenue generating service as part of the service providers’ offerings. Therefore, ETV (Enhanced TV) is probably a better term than ITV.
The real question is what will multichannel TV consumers pay for. In the past 10 years, there have been many functions or technologies that enhanced the multichannel industry, but never made it as an industry itself. One example is movies on demand in hotels. The real service is making movies available instantly to consumers for a price. No one cared if they were having an interactive experience with the TV set. Now that people have gotten used to paying for this feature, it is becoming the fast growing "VOD (Video-on-Demand) Industry."
What service providers (cable, satellite, telco and digital terrestrial) really want to deploy is services that enhance their current multichannel subscription and total revenue. Remote controls and (EPG) Electronic Program Guides are both functions that do this, therefore are among the more successful functions in the multichannel video industry.
For more info on opportunities and growth in digital services, see IP/Broadband Video Business Case and Global Forecast 2003-2006 and Worldwide Multi-Carrier Digital Settop & Services Analysis & Forecast 2003-2006.
©2003 MRG, Inc.
Why Aren’t DVRs Popular in Europe?
MRG’S Hierarchy of Multichannel Needs.
June 2003
We believe that on-demand video will eventually steal significant
market share from the “real-time” multi-channel
market, once consumers grow weary of wasting time “surfing”
through scores or hundreds of channels. To illustrate how
this happens, we’ve developed the “Personalization
Pyramid” that shows at what point TV consumers are
open to using a PVR/DVR (Personal Video Recorder or Digital
Video Recorder) or an EOD (Everything on Demand) centralized
PVR service.
Digital Video Personalization Pyramid
In households having access to fewer than 10 or 15 video
channels, multi-channel video means too little to merit expensive
PVR or EPG (Electronic Program Guide) services. It is unlikely
that consumers will pay for such advanced services if they
don’t even subscribe to a basic multi-channel service
in the first place.
However, people who do subscribe to many multi-channel tiers
are interested in more choices. Therefore, after moving up
the Pyramid to beyond 200 channels, consumers are more likely
to want an EPG to help them navigate; and after that some
sort of (easy to use) PVR to help them save time and get added
benefit from their (now expensive) subscription. In the UK,
where BSkyB offers over 100 channels and where cable also
offers similar services, a demand exists for EPGs and for
PVRs for these very reasons. Yet, the standalone-PVR maker,
TiVo, recently had to pull out of the UK market due to the
lack of enough multichannel users (besides BSkyB users who
are already using BSB's bundled PVR) to support the standalone-PVR
market.. We think similar patterns will occur in other markets
where 100+ multichannel services offer consumers a real choice
of providers.
For more information on the opportunities in digital settops
for cable, satellite and digital terrestrial, see Worldwide
Multi-Carrier Digital Settop & Services Analysis &
Forecast 2003-2006.
©2003 MRG, Inc.
The Race for Bundled
Services Between Telcos and Cable is Just Beginning
May 2003
In a recent quote, SBC CFO Randall Stephenson says that “while Wall Street and the media fixate on increased high-speed
service competition between cable operators and phone companies,
the market has been fiercely competitive for some time. SBC
serves more high-speed subs. than cable companies do in Los
Angeles, San Francisco, Dallas, and Houston, he contends.”
SBC needs to look again about how it “beat the competition”
to high speed data (HSD)—at least in Los Angeles and San
Francisco. One of the reasons for this “victory” is
there was no real competition in these markets until just recently,
since much of the (now Comcast previously TCI) cable systems
were comprised of some of the worst designed and operated cable
plants in the country. While it is laudable that SBC and its
ILEC (Large Telco) brethren finally woke up and heard our cries
about the strong demand for HSD services, the fact is that the
really competitive markets (like Philadelphia, Atlanta, and
others), where cable plants have achieved HFC network status
necessary to provide reliable 2-way communications, the ILECs
have less to crow about.
This doesn’t let the cable companies off the hook, however,
since ILECs tend to have deeper pockets than cable with which
to do cap-ex upgrades. Once the ILECs really get serious about
the 2-way broadband business, they will also see that the video
business also has become a possible source of revenue.
Find out more about new Telco TV market opportunities in our
new (global) report IP/Broadband
Video Business Case and Global Forecast 2003-2006; and about
how cable is strategizing to bundle services (VOD,PVR,VoIP,
High Definition) and steal voice business from ILECs in our
new (global) report Worldwide
Multi-Carrier Digital Settop & Services Analysis & Forecast
2003-2006.
©2003 MRG, Inc.
Communications - Not
Munitions - Is Our Military and Economic Trump Card
May 2003
Rarely is communications technology mentioned as one of the
US' strongest economic, military, and scientific advantages.
If the administration really wants to stimulate the economy,
why not stimulate core and applied research in improved bandwidth
utilization, media compression, storage area networks, real
time 3d simulation, embedded processing and storage, and miniaturized
(or molecular-level) sensing and reporting?
Computers and electronics in the 60s and 70s helped us win the
space war against the Communists. Communications technologies
also helped to topple the Berlin wall and the Communists because
it allowed Soviet citizens new access to Western thought and
science. This year in Iraq, no one disputes the value of US "smart" bombs that use Global Positioning Satellites, advanced
image recognition, and real-time guidance systems to pinpoint
target buildings. The number of (always regrettable) civilian
deaths was a fraction of what it would have been even 10 years
ago with "dumb" munitions used at that time. Communication between
the infantry soldier, his comrades, and the command center were
incalculable in keeping US military casualties to a record-low
level.
Much of this communications and processing technology came from
products developed in the private sector. Yet, today's Silicon
Valley companies-aside from the few contracts they received
from the Departments of Defense and Homeland Security-are sitting
with vast overcapacity and are firing engineers and developers.
In reality, advanced communications technology should be a top
priority-not an afterthought-for national security and economics
growth. If this administration wants to get the economy going
(both here and overseas), one of the fastest ways is to fund
core technology research quickly, before more of our scientists,
engineers, and business support people disappear into the ether
and take our national treasure with them.
For more information on communications and biotechnology market
research, consult our Reports section.
©2003 MRG, Inc.
Anti-churn Devices in
Cable: The Race for "Stickiness"
April 2003
One of the least understood issues in cable operations today
is the degree of “churn” (or customer turnover). Two
percent per month churn, if it is discussed at all, is considered
“not bad” by many operators, although that results
in a whopping 24% per year. So, by introducing compelling and
loyalty-building (or “sticky”) services to subscribers,
cable has been working a long time on turning this problem around.
Time Warner appears to have hit upon a clever loyalty-building
tactic that shows considerable promise. This tactic also upgrades
subscribers from analog to digital and gives them some “sticky” (loyalty-building) devices like PVR (Personal Video Recorder),
VOD (Video on Demand) and advanced EPGs (Electronic Program
Guides). For example, TW is placing SA 8000 set-top boxes in
certain homes and charging about $10/ month (instead of the
normal $4-5) for box rental, which includes the PVR and advanced
EPG.
Since tests already have shown that PVRs and EPGs are “addictive”
once people try them (ie, people won’t give them up once
they’re used to using them), this anti-churn tactic appears
to be a winner. By charging a box usage fee of $10/ month over
roughly 36-40 months, TW can reach break-even for the new box
and meantime sell more VOD services and build loyalty with the
PVR. For more info on on anti-churn tactics, see Worldwide
Multi-Carrier Digital Settop & Services Analysis & Forecast
2003-2006.
©2003 MRG, Inc.
Why the Remote is the Unsung
Hero of New TV Services
March 2003
What's the big difference between a PVR and a VCR? Some people
just call a PVR a "tapeless VCR". The real differences lie in
the EPG (Electronic Program Guide) and what it enables with
the lowly REMOTE control.
First, today's remote works much better than the originals in
the early and midterm days of VCRs. Somehow, they were unreliable;
often didn't communicate effectively; and you couldn't control
the EPG. Which brings us to the second point. The on-screen
EPG (Electronic Program Guide) also deserves the Nobel Prize
for making TV consumption easier (and more peaceful among family
members). Surfing 200+ channels is no longer necessary.
Companies who integrate PVRs and EPGs into their settop, but
ignore the user interface do so at their own peril. For more
information about PVRs and other on-demand products like VOD
and SVOD, consult Home
Gateway 2002: Worldwide Cable Market Forecast for Digital Settops & Related VOD, PVR & ITV Services, Worldwide
Multi-Carrier Digital Settop & Services Analysis & Forecast
2003-2006, and IP/Broadband
Video Business Case and Global Forecast 2003-2006 reports.
©2003 MRG, Inc.
March 2003
We hope this industry will come to see the value of using PVR (Personal Video Recorder) instead of DVR (Digital Video Recorder). With all due respect to “DVR” advocates, the predominant usage sides with PVR because it emphasizes the true market driver--personalization. PVR will last far longer than DVR, because PVRs will afford consumers more personal control over content long after the D in Digital becomes passé. One major reason the term “PC” is so popular is the fact that it gives people more personal control over their data (and lives), irrespective of the fact that it uses digital data to do it. So we think PVR will have more staying power and will go further in explaining its value and greater meaning to consumers; while allowing all kinds of innovation to happen without us having to re-define the term again because of some technical change.
For more information about PVRs and other on-demand products like VOD and SVOD, consult Home Gateway 2002: Worldwide Cable Market Forecast for Digital Settops & Related VOD, PVR & ITV Services, Worldwide Multi-Carrier Digital Settop & Services Analysis & Forecast 2003-2006, and IP/Broadband Video Business Case and Global Forecast 2003-2006 reports.
.
©2003 MRG, Inc.
Why Broadband Continues to Grow Despite "Telcom" Meltdown
February 2003
Investors need to be reminded that the real opportunity for growth is in last-mile broadband deployment, not in backbone deployment which comprised much of the over-expansion in the late 90s and early 00s. Here are a few reasons why demand for Broadband continues to grow, expressed in a Q/A format:
1. Isn’t there already a bandwidth glut?
In the US market, “last mile” usable bandwidth continues to be the big challenge, since it is expensive and hard to do right. The "backbone" isn't usually the problem. The bottleneck usually occurs between the hub (sometimes called "node) and the end user's home. Therefore, pent up demand for IP broadband still exists, initially for High Speed Internet services (to the deskstop/laptop); and eventually to the settop (on TV sets).
As mentioned before, we think cable operators worldwide will eventually have to offer more on-demand video services because of competition from satellite. As VOD becomes EOD (Everything on Demand, more like a virtual PVR), the need for cable operators to go to distributed/cache model will grow. Eventually, the low cost of IP (Internet Protocol) video over cable will replace the multi-channel broadcast approach used by digital cable and DTH (satellite) operators.
2. Do cable operators need a distributed/cache model to cope with anticipated on-demand growth?
Yes, because of the need to personalize, services from multiple sources will eventually continue to grow the need for more personalized bandwidth.
3. VOD and centralized PVR (or Networked PVRs) have become a popular topic. Do cable operators prefer the route they seem to be currently taking towards centralization?
Centralization is still cheaper than distributed/caching. Much also rides on how many subscribers are connected to each hub. If it's 100, then centralization works for longer. If the number is 2000, centralization has specific limitations. Some cable companies are already using PVR-enabled settops (given away free) as a lure to upgraded customers to digital and VOD, which maximizes the use of caching both at the node and in the home.
For example, Time Warner, in Q3/Q4 02, gave away almost 200,000 SA 8000s (including installation) to analog (and digital) customers as a means to upgrade them to digital (or to keep digital customers happy). For a rental fee of $10/month, customers get a free PVR, VOD access, and access to the digital tier. We believe this will be a trend in 2003-2008, as cable companies progress toward exploiting their QAM networks to the maximum prior to going 100% IP.
For more information consult IP/Broadband Video Business Case and Global Forecast 2003-2006; Home Gateway Report: Worldwide Multi-Carrier Digital Settop & Services Analysis & Forecast 2003-2006; and Home Gateway 2002: Worldwide Cable Market Forecast for Digital Settops & Related VOD, PVR & ITV Services.
©2003 MRG, Inc.
Will TV and Film Industry
Fall into the Napster Pit? - A CES 2003 Update
January 2003
Breakthroughs in On-Demand & Personalization —
Inching Toward Fair Use Agreement (Sans Attorneys)
One of the most important (and overlooked) occurrences at
CES03 is when FCC Chairman Powell stated that "TiVo is God's
machine,” in an interview with CES/CEA Chairman Gary
Shapiro. Shapiro added that he hoped that everyone in Congress
could get a TiVo so that they could understand some of the
new technology. These and other indicators show that time-shifted
and personalized use of TV is here to stay.
Safe Home Network Sharing
One of the overlooked new features on the Series 2 TiVo is
its ability to share programs within a household (enabled
by keys issued from the TiVo headend) for both Standard Definition
TV and High Definition TV in 2003. This copy protection application
adheres to the essence of the Betamax case ruling (U.S. Supreme
Court, 1984) in protecting the copyright holder (i.e. movie
studios, networks) from loss of revenue through illegal distribution
of digital copies on the Internet.
Fair Use Front & Center
TiVo’s new sharing function is important because it also
protects the Fair Use rights of users who want to make a personal
copy and use it for personal use. Of course, with TiVo and
most other PVRs (Personal Video Recorders)*, you can output
to tape (which also is in keeping with the Betamax case).
Once the industry starts understanding the real meaning of
Fair Use, which was established long before the Betamax case,
they (hopefully) will be able to come to agreement internally
without letting the attorneys complicate the process. Effectively,
Fair Use protects the personal use of a purchased copy and
the ability for the owner (of the copy) to make a backup copy.
It also protects writers’ freedom to quote portions of
the work in criticism or parody.
Because the PVR “industry” is adhering to the guidelines
of the Betamax ruling, we believe the video/movie industries
will avoid falling into the “Napsterization pit”
that plagued the music industry in the past few years. By
stepping around the Napster problem, the industry should be
able to implement PVR (Personalization) functions into many
TV-settop products.
For more information consult:
• IP/Broadband
Video Business Case and Global Forecast 2003-2006;
•
Home
Gateway Report: Worldwide Multi-Carrier Digital Settop &
Services Analysis & Forecast 2003-2006; and
• Home
Gateway 2002: Worldwide Cable Market Forecast for Digital
Settops & Related VOD, PVR & ITV Services.
* PVR is sometimes called DVR or Digital Video Recorder.
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