Connected TV market to hit 76% by 2015

While their presence was more subtle than 3DTV and not as in-your-face as non-iPad tablets, connected consumer electronics devices were more diverse and pervasive at the 2011 International Consumer Electronics Show in Las Vegas, with every major manufacturer showing off new electronics that have their own built-in apps and can access content from the Internet.

With devices that incorporated complete Internet browsers, HDTVs that offered hundreds of applications, even set-tops that turned current HDTVs into a completely connected device, the theme of combining the home theater set-up with a PC experience was everywhere.

“We’re starting to see some real trends develop here,” said Kurt Scherf, VP and principal analyst with Parks Associates. “And connected TV is not just about online video.”

Consider: In 2010 less than a quarter of all HDTVs were connected, according to research firm Parks Associates. By 2015, Parks believes that number will hit 76% (more than 150 million units). The firm projects that by 2015 there will be more than $8 billion worth of transactions on connected consumer electronics devices, from e-purchases to gaming to VOD and streaming.

For the complete article, please click here.

Adobe Enhances Flash Video, VOD Distribution

Adobe Systems Inc. signed an agreement with a Seattle-based company that affords media publishers enhanced security when distributing Flash-based transactional video-on-demand (VOD), subscription, electronic sellthrough and rental on PCs, mobile devices and pay-television.

Adobe said thePlatform’s mpx video management software gives content owners easier tools to deliver Flash-based premium video across multiple platforms. The top 10 video sites in the United States use Adobe Flash, making it the number one format (other than Apple’s QuickTime) for viewing video on the Web, according to comScore.

Ian Blaine, CEO of the Platform, said its software allows media companies to enforce content rights, business polices and monetization models, while making it appear seamless to consumers.

John Vartanian, chief technology officer with iN Demand, said the new tools would allow its pay-TV affiliates with a more secure streaming video delivery system. The company is a major distributor of Hollywood VOD movies to cable operators, including Time Warner Cable, Comcast, Cox and Bright House.

For the complete article, please click here.

Sony Video on Demand Powered by Qriocity

Whew, what a week of online video announcements! I did find the official announcement from Sony regarding the Video on Demand powered by Qriocity service at IFA.

Here are the details:

• Sony will deliver a variety of digital entertainment content and services that are "powered by Qriocity", including video, music, game applications, and e-books over time
• The service is currently available in the U.S. and will be available this fall in five European countries including France, Germany, Italy, Spain and the U.K.
• Customers can choose from "hundreds" of movies from 20th Century Fox Home Entertainment, Lionsgate, Metro-Goldwyn-Mayer Studios Inc. (MGM), NBC Universal International Television Distribution, Paramount Pictures, Sony Pictures Home Entertainment, The Walt Disney Company, and Warner Bros. Digital Distribution, as well as popular content from top local studios.
• Many movies are available in High Definition (HD) as well as Standard Definition (SD)
• The service will be available on Sony's 2010 models of network-enabled BRAVIA® TVs and Blu-ray Disc™ players, and Blu-ray Home Theater systems.
• Sony also announced plans to introduce "Music Unlimited powered by Qriocity™", a new, cloud-based, digital music service.
• "Millions of songs"
• Music Unlimited powered by Qriocity" will initially be available across Sony's 2010 models of network-enabled BRAVIA TVs, Blu-ray Disc players, Blu-ray Home Theater systems , as well as PlayStation®3 computer entertainment systems and VAIOs and other personal computers, and will become increasingly available on a range of Sony's portable devices.
  
  
  

Fancast Xfinity TV rolled out by Comcast

Comcast has rolled out an on-demand, streaming TV service, Fancast Xfinity TV, which will be available to those who subscribe to both Comcast’s digital cable and internet services.

Xfinity contains 2,000+ hours of content, and includes shows - and indeed, entire seasons of shows - from content partners including HBO, Cinemax, Starz, TNS, TNT, A&E, AMC, Discovery Channel, History, and BBC America.

The move is considered the biggest step so far in the cable industry’s TV Everywhere initiative, which hopes to keep the cable TV model viable and profitable as viewers increasingly move to the web to watch free programming.

“It’s our goal to allow a customer who buys a package of content from Comcast to access that content on any screen at any time,” Amy Banse, president of Comcast’s interactive-media unit, said during a demonstration to reporters (via the Wall Street Journal). “We think this is yet another step in that direction.”

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Consumer viewing of movies and TV shows online doubles in 2009

The number of U.S. broadband households watching premium online content, including movies and TV shows via the Internet, doubled in the last year, according to Broadband, Communications, and Entertainment Bundles, a new study from Parks Associates. Currently over 25 million U.S. broadband households regularly watch full-length TV shows online, while over 20 million watch movies online.

The international research firm reports that the growing popularity of online portals such as Hulu.com shows rapid growth in the number of viewers who use the Internet to watch long-tail and premium content. This shift highlights the opportunity for service providers to extend their current pay-TV and video-on-demand services to include online and mobile video features. In fact, providers will have to embrace online video services, including the ability to deliver content across multiple platforms, if they are to remain competitive and attract new subscribers.

Consumer interest in time-shifting content through online portals has increased significantly. Close to 40% of broadband households today watch full-length television shows over the Internet. Enabling access to content anytime through any broadband-enabled device will be a significant challenge for the service providers. However, broadband video opens new revenue channels and opportunities to upgrade subscribers into higher tiers of services.

For the full press release, click here.

Consumers and the Recession: Crisis or Opportunity?

The Recession

On December 1, 2008, the National Bureau of Economic Research declared that the U.S. economy was in a recession that began in December 2007. While it took these experts a year to make this official determination, consumers have most certainly had a cloud of economic uncertainty hanging above them. The economic news in 2008 has come in constant waves of news, with increasing severity. From talk early in the year about plummeting home values and mortgage defaults, gas prices that peaked to record highs in July, the collapse or financial bailout of major banking and insurance institutions, to trillions of dollars of lost investments, and the potential for major bankruptcies in the U.S. auto industry, consumers have been buffeted by bad news. No wonder, therefore, that consumer confidence, as measured by the Conference Board Consumer Confidence Index™ hit an all-time low in October 2008, with only a slight rebound in November.

Parks Associates Consumer Research in 2008: Understanding Consumer Buying Changes

Our consumer research in 2008 has understandably had more of a focus in understanding potential changes to consumer spending and entertainment habits because of economic conditions. One nice thing about running many surveys throughout the year is the consumer sentiment tracking that we're able to pull together. For example, we included consumer sentiment and behavioral tracking questions in a number of studies this year, including:

• National Technology Scan (Q1);
• Consumer Electronics Purchases: Quarterly Monitor (Q2);
• TV 2.0: The Consumer Perspective (Q3);
• Entertainment 2.0 in Europe (Q3); and
• Digital Media Evolution (Q4).
  

How is the Economy Impacting Consumer Spending?

I'll give you an example of where the tracking has been useful as we've asked some consistent questions in each survey. When we ran the National Technology Scan in January 2008, economic concerns were already quite prevalent. In this study, we asked consumers about whether they had already changed their spending habits as a result of economic uncertainty. At that time, about one-half of those surveyed indicated that they had not yet made any changes. However, about a quarter of respondents – in response to the higher gas prices – were indicating that they were driving less. In categories that would most directly impact the cable industry, smaller percentages of consumers indicated that they had cut back for outside entertainment.

By April, our Consumer Electronics Purchases: Quarterly Monitor indicated a significant shift in consumer mindset regarding the economy and the impact on consumer spending. Nearly two-thirds of consumers surveyed indicated that they had changed spending habits. It is notable that expenditures for outside-the-home entertainment (such as going out to the movies) was taking a bit hit at this time. In terms of spending that was likely threatened, the top three categories were dining out, travel, and out-of-home entertainment.By the time our Digital Media Evolution survey was fielded (late November 2008), the full effects of the economic situation were being felt fully by businesses and consumers alike. Nearly 50% of consumers surveyed indicate that they will be spending less on consumer electronics because of the economic conditions. And, although Black Friday and Cyber Monday both showed growth over 2007, there is no guarantee that spending for the rest of the holiday season will remain as healthy. For household services (such as Internet and pay TV), recessionary concerns appear to have less impact. Consumers are far more likely to cut back on travel, dining out, and outside entertainment expenses before trimming household services such as home telephone, pay TV, and Internet. Only 4% of consumers with home phone service and pay TV service, respectively, plan to cancel their services because of the economy. More recession-proof are services such as Internet and mobile phone.

Where are the Opportunities?

Although all companies should rightfully be concerned about the impact of the economic slowdown on their businesses, can there be opportunities, particularly among service providers? Interestingly enough, there are dynamics within the industry that point to potential gains among broadband, communications, and entertainment providers.

One key data point that comes out of our surveys (and the surveys of industry players) is the continued growth of entertainment-at-home (at the expense of outside-the-home entertainment). One interesting finding from our TV 2.0: The Consumer Perspective study is the self-reported changes in video habits. As was indicated earlier, consumers are far more likely to reduce expenditures for outside entertainment like movies in a recessionary period. Video-on-demand leads the way in increased video consumption, while DVRs and on-demand programming appear to have taken a significant bite out of renting or buying television series on DVDs.

Verizon recently reported some research that confirms this finding, noting a rise in what they call "Home Enterstayment." In a December 1 press release, the company reported that a majority (57 percent) plan to spend more time at home turning to their television instead of events outside the home.

Focus on Cost Savings: Customer Support in the Digital Home

In these uncertain economic times, revenue-growth strategies may take a back-seat to more of a back-to-the-basics approach of cost savings. Chief among OPEX reductions should be strategies that work on streamlining customer support, which could be a huge cost liability for service providers. Our own research, for example, finds that service provider costs for supporting home networks alone could run in the hundreds of millions of dollars annually. By implementing self-diagnostic and troubleshooting solutions and building remote support capabilities, service providers can actually turn customer support from a liability to an opportunity, reducing OPEX costs initially and perhaps growing revenue-generating customer support businesses in the long-term.

I'm actually at the Cisco C-Scape analyst event right now, and the customer support enhancements are a key strategy that is being communicated by the company's executives as they look at their roadmap from 2009 and beyond. It's clear that they will be taking the Pure Networks assets and tying them more closely with both their customer premise equipment and their service provider solutions. OPEX cost reductions, their executives argue, will be a critical factor in service provider strategies.

Concluding Thoughts

Although there is no such thing as a truly recession-proof business, we are encouraged by what the data we've collected this year indicates how companies can take advantage of opportunities to solidify and plan for future growth. For service providers in particular, two key opportunities are bringing a high-quality and convenient entertainment experience to the home and improving customer support. If you look at the key service provider strategies today - customer retention, customer acquisition, and revenue growth per subscriber - these two areas alone will drive significant long-term benefit.

Cable TV Faces Customer Satisfaction Issues

Video-on-demand may be cable’s best bet for improving customer satisfaction with services --

Cable television could see a mass migration away from its services, according to Parks Associates' TV 2.0: The Consumer Perspective, if providers do not improve their consistently low satisfaction ratings among subscribers.

This new report reveals that subscribers to satellite television and telco/IPTV are significantly more likely to be satisfied with their services than both basic and digital cable subscribers. These market conditions leave cable carriers vulnerable to subscriber churn, and the survey recommends they quickly enhance advanced services like video-on-demand (VoD) to reverse this trend.

Cable operators have struggled in selling the value of their services and framing their services as an enhanced and convenient form of entertainment will be critical in reestablishing higher satisfaction. VoD initiatives, particularly those aimed at delivering a “Primetime, Anytime” experience, should be key elements in this effort.

TV 2.0: The Consumer Perspective is a survey of more than 2,700 U.S. and 1,000 Canadian adults in households with broadband Internet access. Key sections of this study:

• Consumer electronics use habits, with a specific focus on how
• Media Center PCs, TiVo set-top boxes, and game consoles are used to receive Internet video content
• Consumer interest in new video-centric products, such as Apple TV, VUDU, and the Slingbox
• Tracking changes in video consumption habits, focusing primarily on television and movie content
• Internet video consumption, including popular genres, locations for Internet video viewing, and payment
• Cable, satellite, and telco/IPTV pay-per-view and video-on-demand use and interest in video-on-demand features
• Satisfaction with current television provider
• Consumer interest in, willingness to pay, and potential churn trigger of 21 enhanced elevision features

To view the full press release on this report, please click here.

Is the Fancast Store a Mistake?

In the age of online entertainment, consumers get virtually unlimited choice of content and unlimited means to entertain themselves. They can stream their favorite episode of Lost from ABC.com, watch full-length movies on Hulu or even download episodes of shows like the The Office from NBCDirect and they can do it all for free.

These choices offer consumers unprecedented amount of control over their entertainment experience, which is bad news for incumbent content aggregators: cable, satellite and IPTV companies. The incumbents have to create a way to deliver increasingly-sophisticated entertainment to consumers for free.

Amy Banse, the president of Comcast Interactive Media, alluded to some of these
challenges during her keynote at the Parks Associates CONNECTIONS™ event in July
(http://parksassociates.com/events/connections/2008/attendees/materials.htm).

Comcast is a great example of an incumbent provider working hard at establishing new entertainment avenues for consumers. In 2006, it launched Ziddio, a user-generated portal similar to YouTube. It followed up with FearNET.com, a horror movie and community site. In 2008, it launched Fancast, a video aggregation and streaming site.

Not all its experiments have been a success. In August, Ziddio has closed its doors (or shut down its servers) for good. FearNET, on the other hand, is alive and growing. In 2007, Comcast expanded it onto the video-on-demand (VoD) platform. This is a critical step for Comcast, as it is trying to build a holistic consumer experience, linking TV, internet and mobile into one.

Comcast’s latest foray into the digital media distribution is the launch of it’s Fancast store in September of 2008. Using the store, any broadband customer in the US can download from over 3,000 titles. Comcast plans to expand the library to 10,000 by the end of 2008. With the new store, users will have an option to buy or rent the video and download it to their PC at prices comparable to Amazons: $10-15 to buy and $4 to rent.

This latest expansion makes me pause to think about what Comcast is trying to accomplish. Have they not learned from iTunes, Hulu and Veoh? What about Netflix and Walmart, who got their own bruises trying to set up digital distribution?

Without a doubt, Comcast will face many of the same challenges as distributors listed above, however, in Comcast’s case, there are significant benefits that would make this strategy worth the risk and give Comcast a chance to succeed. Let’s take a look at each in greater detail. First, let’s consider the challenges:

•Unfavorable economics. Same argument as applied to Hulu and Veoh and Joost applies to Comcast: content owners keep the bulk of the video advertising revenue. Although Comcast did not comment on the revenue arrangements, it did admit that content owners sell ads in the videos featured on Fancast, which usually means that content owner retains 70-90% of the revenue. With the launch of the Fancast store, Comcast acquires an additional revenue source: consumer purchase and rental fees, however, it is also likely that content owners keep the bulk of those.

•Digital rights ruin consumer experience. Content owners manage media rights very carefully, to ensure revenue maximization. This would hinder the delivery of the holistic consumer experience mentioned above. For example, a movie, or a TV episode may be available on Fancast site, but not available on VoD.
Additionally, content owners are adamant about protecting their content with the Digital Rights Management (DRM) software. Fancast is no exception, using Windows Media DRM. DRM further restricts how viewers can enjoy video, for example, consumers can only watch video on a PC, not a Mac, mobile device or a TV.
Such limitations also interfere with “for pay” business models outlined above. Rather than downloading a heavily-protected video file that can only be watched on a PC, consumers will opt to buy (or rent) a DVD, which can be watched on TV or PC and now even on a mobile device as some DVDs include digital versions.

•Competition will hinder success. Online video field is extremely hot with many hands reaching for very little revenue. From the broadcast networks to the device manufacturers, companies like ABC, NBC, Apple, and Microsoft are all striving to deliver the next generation of the consumer entertainment experience. Standing out in this crowd will require an exceptional product with clear differentiation.

There are, however, opportunities for Comcast in pursuing this strategy:

•Content owners crave secure, multi-platform distribution. As consumers increasingly engage in concurrent media consumption and ad avoidance, the effectiveness of advertising in media decreases. Advertising revenues pose the bulk of revenue for many content owners and they want to ensure that if effectiveness of one channel, such as TV, diminishes, they have another channel, such as internet to supplant it with. Service providers such as Comcast make very good partners for media companies, potentially yielding better revenue splits and more lenient distribution rights.
According to Alix Cottrell, general manager of Fancast, this is the route that Comcast intends to follow. Current plans will allow Comcast customers with VoD or DVR to either copy online content into their VoD folder or have it recorded on their DVR (if the show is only available on linear TV). Comcast plans to implement this service within 12 months. In the next 24-48 months, Fancast also plans to launch a mobile component. Initially, consumers will still have to download content to PC and then port it to a mobile device. If the Clearwire partnership is successful, however, Comcast may also launch a direct-to-device service on par with at&t’s Mediaflo or Verizon’s VCAST. Finally, thePlatform, Comcast’s video delivery arm, has recently acquired Chirp, a social application developer, suggesting that Comcast is gearing to dramatically expand social features of its Fancast service.

•Can build biggest libraries. As a media aggregator and distributor, it is easier for Comcast (and most service providers) to build large video libraries. It can leverage its linear distribution relationships to secure content from many providers. It is also not bound by the media ownership regulations that restrict some of the other aggregators. For example, Hulu still doesn’t have ABC’s and CBS’ content in its libraries and it likely never will. Even if the ideological differences between partners get resolved, media ownership regulations will preclude Hulu from adding more content partners.

So does Comcast’s launch of the Fancast store make sense? Will the store succeed? I think it’s safe to say that it does and it will. Of course it is important to keep in mind that success will NOT be measured by revenue or profitability of an individual property like Fancast. Fancast will, however, condition consumers to seek video online and will also build stronger links in consumers’ minds between internet video and traditional TV. As content owners relax their rights requirements, Comcast will be in the position to deliver the holistic consumer experience, which envelops consumers in content (and advertising) regardless of where they are or which device they are using. That service may even be compelling enough for consumers to consider opening their wallets!