IPTV delays mean opportunity

ABI research released a report today on IPTV. The overall findings aren’t surprising. IPTV rollout in North America is behind previous projections. The telcos were expected to be the primary drivers, but they have fallen behind schedule, citing excessive regulation among other factors. Even where the telcos have begun rolling out IPTV services, true IPTV services are not available. ABI notes that Verizon’s video service is no more than an RF overlay. If that’s the case, then the telcos have nothing to offer over existing cable services. That leaves them to compete on price. Considering the pounding their voice revenues are taking, one would think they’d rather offer premium services at premium prices.

The telco delay also keeps the pure play IPTV companies in the game a little longer, running the risk that someone will gain traction. Among the gang of three – Brightcove, Akimbo, and Dave – Brightcove has the best chance. First, it’s got good leadership. Second, its initial go to market strategy did not include a proprietary set top box. (Akimbo and Dave are moving away from STBs.) Brightcove has instead hitched its wagon to Microsoft Media Center technology that requires networking the TV and the PC. How many non-geeks are going to try that? Who wants more wires and devices in the living room? This is a recipe for glacial adoption rates.

But what if Brightcove could untether the TV from the home network? Then they might have something. Develop a solution that gives users the option of burning content to DVDs or Video CDs. The digital rights management can be similar to that of online music purchases with the customer is only allowed to burn one or two discs of a downloaded program. Since Brightcove is initially focusing on shorter form, long tail content, this can be a viable alternative. The client application can be designed to download, decompress, and burn in the background. It might add some time to the process, but its service isn’t for the instant gratification crowd anyway.

Back in June, Amazon bought CustomFlix – an on demand DVD distributor. It’s not a leap to imagine a download service evolving from this marriage. The fact is that the longer the telcos delay real IPTV rollouts, the greater the chance they’ll miss the opportunity. What if the likes of Amazon or eBay partner with a Brightcove? The telcos will remain stuck in the dumb pipe business.

It’s a phone, not a TV

With the announcements of the video iPod and EchoStar’s PocketDish, there’s been more attention on mobile video in the past week than ever before. The mobile phone carriers should be disappointed. They’ve been in this space for some time with very little to show for it.

From the NY Times Oct. 17, 2005, “Now Playing on a Tiny Screen”

Ms. Barrabee [Yankee Group analyst] places the number of mobile video viewers at about 500,000 in the United States, a tiny number given that there are 193.6 million mobile phone subscribers. To watch video now, consumers must own a phone with video capabilities and pay a service fee to receive broadcasts. A Yankee Group survey found that only 1 percent of those who subscribe to video service on their cellphones watch it monthly.

Those aren’t very encouraging numbers. Since MobiTV claims 300,000 subscribers, that leaves 200,000 for the superior V Cast service from Verizon. Of course superiority to MobiTV doesn’t mean much. It’s like how a Packard was superior to an Edsel.

What should really scare the carriers is the 1% number. A customer lays out a couple of hundred bucks more for a video capable phone, pays $15 or so per month for a video service, then ignores it. How long before the 99% who don’t even check in once a month decide to spend their $15 elsewhere? What do the carriers think that these subscribers are telling their friends about mobile video?

By December 26, just about six weeks after its announcement, video iPods will significantly outnumber mobile video phones in the US. The demographic likely to watch mobile video is the iPod demographic. So carriers need to be creative in crafting mobile video offerings if they are to stay in the video game. Where does this put media companies like Fox?

Fox has been creating “mobisodes” based on its 24 series and made them available for $0.99 to mobile phone users. According to the same NY Times article Fox says it’s spent $500,000 for these mobisodes. To break even Fox has to sell 500,000 of these things, but mobile phone video only provides a potential total market of 500,000. Many would argue that these mobisodes should not be viewed as a profit center. They are a promotional tool for the broadcast version 24. That sounds plausible, until you hear what folks at Fox have to say about it in the same article:

“24: Conspiracy” did not feature “24’s” cast or story line. Instead, Fox hired nonunion actors to keep the cost for the serial under $500,000. “With television, one of the things you have to deal with is the guild and union issues, and we said, ‘Go ahead and do this nonunion and on the cheap,’ ” said Joel Surnow, a producer of “24.” “It is not a ’24’ thing.”Mr. Surnow said he was not concerned that the mobisodes might hurt the “24” brand name. “In a minute, how bad could it be?” he said.

So if it can’t hurt the real 24, how can it help? If these mobisodes can’t fly on their own there’s no point in making them. Why not offer them through iTunes? It’s a bigger market with a better demographic for Fox. When the video content providers jump, where will it leave the carriers’ mobile video offerings?

Video podcast tutorial

Here’s a quick tutorial for those who want to get a video podcast up in short order. You’ll need is the following:

  • QuickTime Pro 7.0.3 for H.264 encoding, QuickTime Pro 6 for MPEG-4
  • Any text editor
  • An FTP client [ Mac | PC ]
  • Web server space
  • A QuickTime movie you may legally distribute
  • Step 1

    Open the movie with the QuickTime Pro Player and select Export from the File menu. From the Options menu select “Movie to iPod video (320×240). Save the file, making sure not to remove or change the m4v file extension. Be prepared to wait. Apple wants your video to look good, so it defaults to the H.264 codec and encodes using 2-pass VBR. On my PowerBook it was taking something like 3x real time to encode. Once you get the hang of this you can experiment with other encoding methods, but for now this delivers a darn good picture even if it takes forever and uses a bit of bandwidth (750 kbs/sec).

    If you don’t have QT 7, you can use QT 6. Export as an MPEG-4 file with the mP4 extension. You will have to set the raster size and the bit rate manually in Options. The mp4 codec yields a lower quality image at the same bit rate as H.264, but encodes a lot faster.

    QT Pro Export Window
    Step 2

    Create the XML file for iTunes or another RSS reader to access. This document is served like a web page from a standard web server. Rather than go through the steps one by one, I’ve created a template. Just go through the template and replace anything written in all caps. You’ll see what I mean once you’re in there. Make sure you save this file as text-only. I prefer to edit these in Dreamweaver or with BBEdit.

    Step 3

    FTP the files to the web server.

    Step 4

    In iTunes 6, select Podcasts in the left column. Under the Advanced menu, select Subscribe to Podcast. Enter the URL of the XML file you created. Your video will begin downloading in iTunes.

    More on IP[od]TV

    From vnunet.com: Apple poised to ignite mobile video

    Apple’s offering, however, is far from complete, warned Michael McGuire, research director at Gartner. The introduction of a video iPod has only solved the technology side of the problem of how to create a market for digital media.

    The amount of video content being offered needs to greatly increase, McGuire pointed out, before portable video becomes a viable business.

    What doesn’t get mentioned in the article is that Apple has solved the chicken and egg problem. It’s introduced a technology that makes it worthwhile to create the content, something Akimbo, Dave, and Brightcove haven’t done. The cool thing is that Apple has essentially guaranteed an ongoing platform for portable video. Every new full-sized iPod going forward is video capable. Apple’s going to sell boatloads of the things anyway because Christmas is coming and the MP3 player market isn’t saturated yet. So Apple makes money while waiting for portable video to take off, and makes money even if it doesn’t.

    I have no idea what the incremental cost of adding video to an iPod is, but I’m sure it’s a relatively small investment considering the upside potential. Also, Apple’s saving money on this generation by dropping Firewire compatibility for USB, so it’s probably very close to a breakeven proposition with little risk.

    One guy who totally gets it and is a pleasure to read about this stuff is Fortune’s Peter Lewis. He loves the new iMac as an answer to Microsoft’s Medi[ocrity] Center and hates the ROKR.

    Still, no one summed up the ROKR better than my friend Jon Alper who noted that an iPod nano duct-taped to a standard mobile phone delivers both a superior form factor and user experience. What can one expect from a product named for a homophobic relief pitcher? The ROKR also illustrates the complete idiocy of big media’s DRM and pricing policies. A ROKR user can buy a song from iTunes but can’t use that song as a ringtone. That song from iTunes costs $0.99 while the ringtone costs $2.99.

    While I’m on the subject of pricing… iTunes charges $1.99 for music videos, further illustrating the absurdity of the wireless carriers’ pricing models. A music video on Verizon’s V Cast costs $3.99. It looks worse and can’t be played on anything but that little phone, and requires a $15 per month subscription to access. And I can’t move the video to a PC or TV. In fact, if I upgrade my phone I can’t move the video to my new phone.

    V Cast will survive. It’s a pretty decent package of mobile data services that just needs a better pricing scheme. But you can start making funeral arrangements for MobiTV. At first glance it has lined up a compelling roster of content providers. The case can be made for a broadcast TV model for news, weather, and sports. That stuff needs to be live. An iPod surely won’t supplant it at any price point. But who needs video on their phones for the weather? If I’m on the go, just give me the text. I can see it’s raining. All I want to know is when it will stop. Sports… some highlights might be cool. But at 1 or 2 frames per second (soon to skyrocket to 10 to 12 if you upgrade your phone), on a screen that makes an iPod look like IMAX, who’s going to pay $10 per month? The diehard sports fans will get their phones from the ESPN MVNO. The rest just want to see how their fantasy players are doing. Text will be fine. News? Those big events will draw interest. But thankfully big news events that have people running to their TVs don’t happen too frequently.

    All that other stuff on MoribundTV can be better experienced on an iPod. Who wants to watch cartoons at a couple of frames a second?


    I spent a lot of time in b-school examining the the mobile video and IPTV space. Mobile video has its place, but the existing players don’t get it. People don’t want to watch TV on their phones. (I wrote a column on this for the upcoming issue of DV Magazine and I’ll link to it once it’s published.) There is a future for mobile video, but it’s not entertainment. Americans use mobile phones as communications tools. Give them mobile video that helps them make a decision in a retail environment or get location based entertainment suggestions. That will work. Snippets of the Daily Show that look like crap and take forever to load are not worth $15 a month.

    IPTV on the other hand shows promise. But most of what’s out there requires and inelegant set top box and/or access to a Windows Media Center PC. Yuck. I’ve got enough stuff hooked up to my TV already, and do I really want to spend a Saturday afternoon configuring the beast?

    This is where the iPod comes in. Sitting in a dock by my TV, it won’t add significantly to the clutter of boxes and devices. In fact it will look pretty cool. It’s dirt simple to use. Now I haven’t seen the image from a video iPod on a TV yet, but if it’s reasonable it might just be the device to bring niche content into the livingroom. I can view content on the iPod, on a PC, or a TV — all managed by iTunes. Not a great day to be Brightcove. One analyst was quoted in the Boston Globe last week likening Brightcove to Google. I would liken it to Pets.com without the cute sock puppet mascot. Brightcove had a clever idea, but it hitched its wagon to the wrong technology.

    I’ve ordered my video iPod. I’ll report back after I’ve had a chance to test it. (It ships in 2-3 weeks.)

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