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Could 2009 be the year when Internet video to the TV takes off?

by Barry Flynn

Much recent interest in online video – the over-the-top type rather than the managed network variety – has focussed on the PC or laptop as the display device. This is hardly surprising, given that most efforts to link the open Internet to the TV, generally through some kind of set-top box, have so far failed to gain traction. But could 2009 be the year when all that changes – and DVD finds itself competing against this new medium on the TV set?

There are a number of developments that suggest that it might, and that – one day – the living-room TV set could even become the principal vehicle for this type of content. But it’s debatable what the threat to the DVD industry is.

First, broadband connectivity to the TV set is increasing in leaps and bounds. The major games console manufacturers, Nintendo, Sony and Microsoft, are all enabling their latest devices with Internet TV capability, and this constitutes a massive potential market. Strategy Analytics revealed last September that there were 100 million active gamers in Europe, and that there was significant cross-over with broadband usage: on average, 46% of European broadband users have and use a game console such as an Xbox, a Playstation or a Wii. (Note that some of these devices also have DVD playback capability).

To games consoles can be added an emerging range of hybrid IPTV/DVB set-top boxes with the capability, at least, of accessing over-the-top content. Set-top boxes for the UK’s free-to-air satellite platform, Freesat, come with a built-in Ethernet port, and there are plans for a Freeview (DTT) equivalent. It is envisaged that both will be able to play back over-the-top content streamed live across the Internet. Similar hybrid devices are currently being considered by major European ISPs.

Finally, TV sets themselves are becoming broadband-enabled. Video news website VideoNuze counted 18 major announcements about new broadband video technologies at this year’s CES show in Las Vegas, two-thirds of which related to extending online video directly to TV screens. Major TV set manufacturers such as Sony, LG Electronics, and Samsung are all backing this type of initiative, and it is a scenario that is explicitly provided for in the Open IPTV Forum’s recently-released specifications.

But is there any support for the notion that consumers might prefer to watch over-the-top video on a TV rather than a PC screen? The conventional wisdom has been that the online paradigm of browsing and clicking is a ‘lean-forward’, personal activity, best carried out on PCs; in contrast to the passive, social viewing that takes place in ‘lean-back’ mode on a traditional TV display, and which the DVD movie is tailor-made for. Consumers are also held to be much more tolerant of the lower-quality video typical of the Web when the display is a PC monitor rather than a TV set.

But there is some evidence from research into usage of the BBC iPlayer in the UK that suggests the conventional wisdom could be wrong.

Virgin Media, which offers the iPlayer to its VOD cable homes, reported last year that its platform accounted for around a third of all BBC iPlayer views in May 2008 – and yet the Virgin cable platform has a significantly smaller universe than the BBC’s online one. Around 44% of its 3.5m TV customers were regularly watching on-demand content at that time, which is to say 1.5m, whereas – according to Farncombe’s calculations – even a conservative estimate would place the number of regular online iPlayer users at around 6m.

That would mean viewers on the TV-based platform were responsible for at least twice as many iPlayer views last May as those on the PC/online one.

Perhaps this comparison is unfair: Virgin runs a managed cable network, whereas the BBC has no control over the quality of a PC-based viewer’s broadband connection – so the iPlayer viewing-experience on Virgin should be better. Moreover, the range of on-demand video content available through Virgin is much smaller than that available on the open Internet - so iPlayer content on its VOD platform should have less of a struggle competing for attention.

On the other hand, one could quite easily argue precisely the opposite on both points: iPlayer users stream and download on different occasions , so they are able to control playback quality if it’s important to them. Meanwhile, there is so much dross on the open Internet that BBC programme content – promoted by a BBC website that is one of the most successful Internet properties in the UK – should be all the more conspicuous online.

What is clear, though, is that when people are asked what they would like to do with a browser on their TV set, if it came equipped with one, accessing video-on-demand without a PC comes top of their wish-list.

David Mercer, Vice President and Principal Analyst at Strategy Analytics, wrote recently about research his company had carried out into ‘TV browsing’ preferences. The results, produced in association with Oregan Networks, ranked the applications respondents valued most as follows:

1. Access Video on Demand without a PC
2. Searching the home network for video content
3. Access user-generated content such as Youtube
4. Play media from a USB drive
5. Share television experience using messaging services
6. Make video conference or voice calls via the TV
7. Download widgets
8. Give the TV different colour schemes or skins

Mercer commented: “it should not be surprising that what consumers want to see on their “TV” screen is… TV. Many of them are now fully aware that a vast video content library is available on the internet, and they would like to see that content on the TV set.”

There are technical barriers to delivering that promise, of course. One is being able to guarantee that over-the-top streamed video will play back on a broadband-enabled TV at the required quality level. As Mercer remarked, “It is understandable that few players are willing to commit to internet video as the primary capability of connected TVs when they have historically put so much effort into guaranteeing the best possible video quality and reliability from “managed” TV services such as broadcast and cable.” And, one might add, from DVD!

With increasing broadband speeds and advances in compression and transmission technologies, who would deny that the quality may one day be good enough to approach that of a reasonable analogue PAL signal – but we are setting a high barrier indeed if over-the-top video has to match Blu-Ray in quality, especially on HD-Ready flat-screens which will expose every artefact in highly-compressed, low-res content.

This is what I think offers the optical disk quite a lengthy breathing-space as it competes against over-the-top services to the TV. And there are a number of other factors that could undermine the competition:

1) The early signs are that a gated approach is the predominant model being adopted to connecting up TVs – they are not being used to access the open Internet, but restricted content from a single supplier. This will play badly with consumers familiar with the range of content available on the open Internet.

2) Second, the technology approach appears to be largely a PC-derived one, driven in part by Intel seeking to embed its new Media Processor CE 3100 chip in CE devices. This is not cheap – one reason why broadband connectivity is being reserved for top-of-the-range HDTV models.

3) Third, the traditional pay-TV operators, who have their own proprietary online video platforms populated with exclusive premium content, are unlikely to take this challenge to their set-top box-based model lying down.

Whatever the outcome, we are currently witnessing the first stages of a titanic struggle over the future of the TV set and who controls it. But for my money, the chief casualty is likely to be the digital TV set-top box rather than the humble DVD player. The TV manufacturers have long resented the way pay-TV operators have insinuated themselves between their displays and the customer, and broadband-enabled TVs offer them a once-in-a-generation opportunity to fight back.

In the words of that over-used (but in this case, surely appropriate) cliché: ‘stay tuned!’

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