Category Archives: Internet Tv

Rethinking Ratings

Last week the NY Times reported in its Media Decoder blog that Nielsen is rejiggering the way it tabulates ratings to include Internet connected TVs. Of course media executives are in favor of any upwards pointing tweak to the algorithm, but how much closer to reality is this making the ever dubious ratings game?

I think not much. Nielsen still isn’t counting laptops, tablets, and phones. Just big, old flat screen TVs.

The new definition “will include those households who are receiving broadband Internet and putting it onto a television set,” said Pat McDonough, the senior vice president for insights and analysis at Nielsen. Currently a “television set” is the flat-screen kind…

…just 0.6 percent of households in the United States meet the new description.

It’s a start, but for how long are advertisers going to care about the aggregate? If everyone isn’t seeing the same ads, what good is the data? And don’t we already have good numbers on ads that reach viewers via IP?

To an advertiser a ratings point equals 1.1 million or so households viewing its ad. Advertisers don’t really care about who viewing the surrounding content. In the age of the DVR, VOD, and TV over IP, that’s not just semantics. The discrepancy between eyes on the content and eyes on the ad can be significant.

According to Wikipedia, the number of homes with televisions dropped by 500,000 form the previous year. A cynic might argue that a mere 0.6% upwards adjustment was concocted to maintain the value of a rating point, not the value of the data. It’s time for a fundamental overhaul of the ratings system. Television might be the first case in the modern media era where the IP-delivered ad has greater value than the traditionally delivered ad due to targeting and mandatory viewing through technologies like fast forward disabling in VOD.

Internet-enabled TVs take off

It took a lot less time for IPTV to reach its inflection point than it did for HDTV. It’s not surprising as it’s hard to imagine a consumer technology roll out as flawed as HD. iSuppli released a report last week predicting Internet-enabled television sales in 2010 will significantly outpace 3D TV sales.

Global shipments of IETVs—i.e., TV sets with built-in Internet capability—will amount to 27.7 million units in 2010. In contrast, 3-D set shipments will total only 4.2 million this year. While 3-D television shipments are set to soar in the coming years, iSuppli’s forecast shows the biggest near-term growth story is in IETV.

iSuppli expects the trend to continue through 2014. By 2014 I would expect every television sold in the developed world to be Internet enabled. Never will every TV be 3D capable — stereoscopy in the kitchen or bathroom can lead to some unexpected outcomes. But predicting IETV sales to exceed 3D set sales is like predicting tires will be a more popular accessory in motor vehicles than convertible tops. To paraphrase Seth and Amy — Really?

What is truly interesting is that by 2014 iSuppli expects there will be about a quarter of a billion IETVs in homes. That is going to be like a tsunami to the broadcast and cable industries. If you think the audience is fragmented now, just wait until the cost of starting a viable “TV network” hits the mid-four figures. Micro-pay per view and Google-like ad models will destroy traditional cable subscription models.

While the cable companies might be seriously injured, they are likely to survive. The IETV roadkill will be the set top box manufacturers — Roku, TiVo, and Apple TV (if Apple doesn’t mercy kill it first).  The standalone IPTV device will go the way of the standalone GPS. Navigation will be as common on phones in the next few years as cameras are today. Who’s going to need a Garmin? Even Steve Jobs kind of agrees.

There’s an obvious pattern emerging in consumer electronics. A market is created and validated by a single-use device, then the single-use device is pushed aside by multi-use devices delivering the same functionality. That’s why the Android platform is the death of Garmin, and the iPad will flatten the Kindle.

Of course what we don’t know yet, is Aunt Mary in Peoria going to have any idea what to do with an Internet-enabled TV.

Recommended reading

For a trip down memory lane read Joel Brinkley’s Defining Vision about the two-decade HDTV debacle in the US. Manufacturers, legislators, and regulators did just about everything they could to destroy HDTV.

Apple TV’s next moves?

Before the Christmas holiday, rumors of Apple’s overtures to the networks abounded like so many visions of sugar plums. Journalists and bloggers posited about the effect of Apple’s entrance into the subscription television market. Most of the analysis was solid. The Seeking Alpha blog featured this succinct write up. Most expect a successful Apple offering would threaten cable and satellite subscription models. Others note that an invigorated Apple TV could put the pinch on the Netflix Roku service. Light Reading’s Cable Digital News noted the following.

While cable operators likely won’t face an immediate threat from the subscription service Apple Inc. (Nasdaq: AAPL) is purportedly pitching to major content suppliers, the offering may instead put the hurt on over-the-top video service providers like Boxee and Roku Inc.

It should be noted that Apple TV employs a hard disk. Content is downloaded before it’s played. Roku receives streams, so it’s a lower cost, lower footprint device. Most importantly streaming allows more delivery flexibility. Netflix doesn’t care whether I watch my content on a PC or a TV. Apple TV is anchored to a television. While an iTunes account can be managed from multiple devices, content needs to be downloaded to each to play it. Even with improved progressive download performance, this model has its limitations. One blog noted that a full season of an HD network television series can take up to 50 GB of hard disk space. So there’s a limit to how much content can be delivered to an Apple TV.

For Apple to leverage the strong iTunes brand it has to unhitch content from the device – a fundamental change in business model for a device manufacturer. But if any company has shown the ability to adapt to the digital media marketplace of the early 21st century, it’s Apple. If Apple succeeds at getting content deals in place, I expect a next-generation Apple TV to emerge shortly thereafter.

The future of TV per Cringley

A recent post by Cringley on the future of broadcast, cable, satellite, and Internet TV trods little new ground. Admittedly, it’s pretty much what he’s been saying for the past few years. His general thesis is good, but his argument deteriorates in the details.

…we’re approaching a point where Internet service will equal and then be lower than the marginal per-viewer cost of the broadcast TV model.  This crossover will inevitably happen with the only question being when. That’s a function of bandwidth costs decreasing at 50 percent per year and processing power increasing at 50 percent per year.  My calculations suggest the crossover will happen around 2015, which used to seem like a long time away but no longer does.

Cost per viewer is an important metric from the supply side, but Cringley fails to take into consideration demand – the value placed on the service by users. Even the most aggressive estimates, don’t have reasonable bandwidth for an acceptable television viewing experience reaching 80% of the homes by 2015. Though I’m mostly pleased with Roku’s performance to my 10-megabit connection at home, I spend enough time watching the buffer reload in the middle of a movie that I don’t consider it an acceptable replacement for video on demand. What happens when everyone has a Roku box or some similar device? Five years seems like an awfully short time to solve all our bandwidth issues.

As I’ve said before, five year predictions are great. If you’re right you can link to the prediction and shout from the rooftops how smart you are. If you’re wrong, no one will remember.

Cringley makes one of his bolder five year predictions. Local TV stations will be facing the same business challenges newspapers do today. Not likely. Not only because IPTV will not be in a position to compete, but because broadcast will remain the most cost effective means of delivering live video entertainment. The Yankees and the Red Sox will keep broadcast TV viable for a bit longer than 5 years.

What spurred me to write this post wasn’t the collection of minor flaws in Cringley’s reasoning about the emergence of IPTV. It was his advice to public television executives that set me off.

When Internet TV becomes dramatically, unequivocally, and inexorably cheaper than the other three distribution models, those other models will quickly go away.  That’s why I argued in PBS meetings to forget about spending $1.8 billion to upgrade local stations for digital TV and instead sell or lease that spectrum for commercial data use and throw the resulting $3 billion (lease revenue plus the $1.8 billion savings) into rebuilding the network solely as an Internet service.

Aside from my original point that it’s far too early to ponder such a move. It’s also the wrong path for public television to take. PTV is not a for-profit enterprise. It’s mission is to serve those left unserved by the existing media marketplace. If PTV had any other mission, it would be hard pressed to justify the public funding that accounts for approximately 30% of its operating budget.  PTV makes news and public affairs programming, children’s programming, and cultural programming available to those who can’t afford satellite or cable service. How is this population, still watching TV with rabbit ears, going to make the switch to IPTV? I don’t see the political will in America to wire the inner cities and rural areas of America for robust broadband services.

We can debate the best use of public funds to meet PTV’s mission, but we can’t forget the mission. Cringley should know better. PBS gave him his original platform.

IPTV’s quiet revolution

RokuPolitical revolution’s have their defining moment – a statue is toppled in a public square, a wall comes down, somebody’s head is removed. Technology revolutions are (thankfully) a different breed. The revolution is declared, nothing happens for a long time, and then the trickle of change begins. That’s been the case with IPTV. For all the hype, a lot of nothing has been going down. Maybe the ground is beginning to shift.

Saturday my Roku arrived. Roku is a Netflix-enabled set top box, capable of streaming directly from your Netflix to queue to your TV. Only a relative few Netflix DVD titles are available for streaming, but at $99, the box was worth a try. Set up took more than the three minutes the launch screen promised due to a flash update, but still easy enough. Using your existing Internet connection, the box accesses the Netflix queue. Unlike Blu-ray disks, Netflix has yet to charge additional for this functionality. (Of course Blu-ray began at no extra charge, then cost $1/mo., and now runs $4/mo. per standard account.)

Netflix did what I wanted Apple TV to do, bring IPTV to my living room. After a year and a half of Apple TV, I’ve bought less than a handful of titles and rented none. Apple TV in my house is nothing more than an expensive iPod with a nifty screen saver for my HDTV. The family already watched more titles on Roku than Apple TV. Until Apple changes the Apple TV business model, Apple TV will remain moribund.

Though initial reviews and customer testimonials have been overwhelmingly positive, it’s too early to declare victory for Roku. There are still rough patches ahead for Roku – or any potentially successful IPTV platform.

  • Pricing model Netflix will have to begin charging for the service. It’s too easy to spend the day streaming titles. Serving up scores of titles per account may become more costly than maintaining DVD stock and using the USPS to act as a governor.
  • Network performance As these services gain in popularity, large areas of the country will suffer network performance issues. I can already tell when school’s out every afternoon in my neighbor based on increased network latency. It can only get worse.
  • Cable providers will want a piece of the action Roku’s using all that bandwidth to compete against cable’s on-demand offerings. Cable is going to want a piece of the action or things might get ugly.

The larger point is that my family is already hooked on IPTV. There’s no turning back.

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