Parks Associates Blog

Friday, June 18, 2010

CONNECTIONS™ Summary Thoughts

Last week's CONNECTIONS™ conference was the best that I can remember in terms of the lineup of speakers and the discussions that we had. Last Thursday, the Parks Associates analyst team provided some closing thoughts on the conference, and I wanted to share my thoughts.

Multi-platform solutions are real: Whether we are talking about third-party solutions providers such as Vuze linking the PC to the consumer electronics device, or Verizon’s vision of “flicking” photos from a smartphone to the TV screen, products are available today to allow consumers to experience content and applications that were once locked into a one-screen experience on many other devices. The question that we have is whether this is good news for open development. After all, companies like Verizon typically take development in-house. So, although we see all kinds of media server and embedded solutions on the market – Allegro, BridgeCo, PacketVideo/Twonky, ACCESS, AwoX, TVersity, etc. – we wonder if these will continue to be relegated to retail-oriented products, or will have a fit in the service provider world. I would imagine that mobile-to-fixed applications may involve service providers opening up their APIs to third-party companies to accommodate these media experiences.

How will Web services and content get to the TV? There are three major lines of thought on how to bring the Web to the TV:

  • The “Intel Vision”: Put a heavy-duty processor in the end-user device to transcode and facilitate the media functionality;
  • The “Verizon Vision”: Use the PC to transcode content and send it to the set-top box in a standard MPEG format; and
  • The “ActiveVideo Networks/Clearleap Vision”: Transcode at the headend and send all content and services as MPEG streams.

We are evaluating all of these possibilities. However, I like the notion that a company can develop one technology and it can provide benefit to both the managed service provider community and the retail/over-the-top devices. I think that ActiveVideo Networks’ transcoding solution is one of these, and I think that Intel has gotten smarter in realizing that a product like the Atom processor can be used to help service providers (the Telecom Italia CuboVision device or the Liberty Global gateway product) and device manufacturers (Google, Sony, Logitech) bring new interactive experiences to viewers.

What content will matter at the connected TV? The obvious answer is premium video - movies and TV shows. Our Digital Media Evolution II survey indicates that the basics (customized weather and traffic widgets) along with music and games will likely to be of interest. In fact, it is interesting to see the growth of interest in gaming applications at the set-top box or connected TV. We believe that this is a space that is just heating up. Companies such as Accedo Broadband and OnLive could be significant players. Of course, as Michael Lantz from Accedo Broadband reminds us, it’s difficult to get consumers to pay for the games! So, how will these services be monetized?

Keep an eye on remote UIs. The concept of the “remote UI,” which would provide a more consistent experience in search and discovery of content across different platforms, will be of significant interest to service providers and content owners. This week, we learned about different technologies to facilitate this:

  • HTML5
  • AJAX CE
  • The RVU Alliance

Securing the connected experience should go beyond the PC. Companies like Mocana remind us that security concerns will grow more prevalent as huge numbers of devices (including those aimed at M2M applications like smart meters) become more interconnected. In fact, this week's Wall Street Journal had a good article about why this is an important space to watch.

Increasing fixed-to-mobile interaction. During the user interface panel, there was discussion about how the mobile phone could be used as an identifier/or token for individual users. What would happen if the smartphone could interact with the set-top box and establish personalized settings and programming lineups for each user?

The number of connected music devices will grow significantly. BridgeCo is an example of how networked music systems may move from the realm of proprietary to mainstream. They are working with major vendors in home audio to bring streaming music experiences to new devices. Could this lead to a resurgence in the music industry actually making money?

TV Everywhere: where does it go from here? It’s been established that TV Everywhere – the replication of a cable TV experience online – is popular. Parks Associates own research indicates that the interest in such an application is strongest among the youngest consumers, where the risk of churning is strongest. Where does TV Everywhere go from here? We think that it will involve moving the experience beyond mere channel replication online and serve as a starting point for service providers to house and sell a variety of content. It will likely start as service providers build out storefronts, where VoD content can be purchased, stored, and then made available on a growing number of devices. We also wonder if TV Everywhere might be the start of experimentation in offering reduced tiers of content – dare we say a la carte channels – to viewers willing to pay a lower monthly fee for just specific channels.

VoD is a key interactive service: The service providers are just beginning to aggressively tout their VoD content as a key differentiator. Expect to see the service providers grow both free and paid VoD content, and learn how to better market it.

Prediction: We imagine that TV Everywhere will lead to a concept whereby service providers work in larger numbers with connected CE manufacturers. So, the partnerships between LG Electronics and Orange and Philips and TeliaSonera in Europe – where service providers are supplying premium content to connected TVs – could be similar here in the U.S. The service providers have the advantage of reduced CAPEX spending on set-top boxes and attracting subscribers/paying users to their premium services.

Is the “Digital Locker” a Reality? Mitch Singer from Sony provided an interesting argument for the digital locker concept. It could reduce the costs of content delivery and management by reducing the number of formats that a service provider or retail entity would have to deliver. However, we heard concerns from service providers during CONNECTIONS™ that the limitation of formats would limit their ability to compete on higher and higher quality content. If a service provider is going to spend billions of dollars to upgrade their network to fiber or DOCSIS 3.0, shouldn’t they have the option of providing a very high-quality format that cannot be easily replicated by an over-the-top provider? Scott Smyers did tell me that although the number of formats would be reduced, there can be different bitrates applied, so a provider with a deep fiber network could choose the highest bitrate encoding and still differentiate on quality.

The premium technical support market is real…now what? It was interesting to have support providers from Korea (RSUPPORT) and Iowa (SecurityCoverage) and tech industry giants such as Accenture promoting their work in providing premium technical care services. We also heard from AT&T and Verizon that they view this market as a revenue creator and not just a cost reducer. We also have the pioneers such as PlumChoice, support.com, and Affinegy, and the market is constantly welcoming new participants such as iTOK. Now, where does the market go from here? It would seem that reaching out to new distribution channels – service providers, retailers, and OEMs – will provide significant growth. Attaching tech support (like PC tune-ups subscriptions) at the time of a new home computer sale will be critical. Also, we should see some major movement into how support is wrapped around mobile services and devices. And, we will continue to see support providers focus on the lifecyle of support – how to be a part of enhancing how consumers interact with technology from the point of new product purchase or service subscription, to product and service installation and training, and then the upgrade and replacement cycle. Finally, I wonder how soon we’ll see support providers get aggressive about the user data they’re collecting and whether this will used in targeting marketing and upsell campaigns?

Is Google TV for real? I see some interesting value for Google’s solution (the ability to initiate content searches across all kinds of content, including your pay-TV provider’s channel line-up), I do see a couple of drawbacks. First, will users really actively use a keyboard in their TV search experience? Logitech says that the Harmony software can be downloaded as an app to Android smartphones, so that would be another option. Second, without the blessing of the pay-TV providers (DISH Network is the only service provider to work with Google TV), Google’s search capabilities will be limited to the provider’s program guide information (Rovi is a partner) and NOT assets like VoD titles. As the VoD libraries of the service providers grow, search and discovery is going to be more and more important – reference Joe Ambeault’s comments about how Verizon constantly changes VoD title art and positioning of its VoD assets to encourage purchases). So, although useful, Google’s search has limitations. I don’t discount the Verizon experience in bringing advanced features to the TV screen, which is to go ahead and undertake the development themselves. So, although Google TV is touted as an open platform, one has to wonder if the pay-TV providers even care? Let’s assume that we start to see more provider-device relationships emerge such as the LG Electronics/Orange deal or Philips Net TVs and TeliaSonera VoD. In this case, could Google TV be useful? Sure, but the question is who controls the user interface and search functionality? I would think that the operator would still want that control.

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