DVD Insider #42 - Beta Will Change the World / High Def - Plugging All the Holes Before / How Much M

THE Insider

DVD Insider #42 - Beta Will Change the World / High Def - Plugging All the Holes Before / How Much Mobile Do "We" Want

DVD Insider #43 -
   -- Next Gen - The Public Be Damned! -- William Henry Vanderbilt
   -- H.264 - If the people have no bread, let them eat cake - Marie Antoinette
   -- You - The jackals are fighting over who gets the biggest slab of meat off the suckers - author unknown

DVD Insider #44
   - I Did It My Way - Old Blue Eyes, Frank Sinatra
   - Dark Side of the Moon - Pink Floyd
   - The Second Time Around - Barry Manilow

by THE Insider
an industry marketing/communications expert with more than 15 years of video, storage and networking experience.


With IDF and the series of Internet/Wi-Fi/WiMax investment announcements the video industry is being wined and dined by a whole new crowd that in the next 5-10 years could change the way you send/receive entertainment content.

DVD Insider #44
   - I Did It My Way - Old Blue Eyes, Frank Sinatra
   - Dark Side of the Moon - Pink Floyd
   - The Second Time Around - Barry Manilow

Technology Can't Croon

Frank Sinatra may have made doing it his way famous but then he had something really going for himself … a single voice half of the population of the world would do anything for!

Unfortunately, the same can't be said for the next generation of DVD. Toshiba and Sony have left the building and have determined they will do it…their way! Instead of singing we get the feeling we're watching the great James Dean classic, Rebel Without a Cause. Remember? "A rebellious young man with a troubled past comes to a new town, finding friends and enemies."

Sure the two have troubled pasts. They both struggled with their successes and failures. They have both lusted for patent supremacy and lost. They both have friends and enemies. Big questions are: How committed are the friends? How determined are the enemies? What about the gotchas they aren't considering?

All of Hollywood is committed…to making money. Lots of it! And the more the better.

They are watching ticket sales slide. They see the newness wearing off DVD sales and people are being more selective in the discs they purchase for their libraries. Dispelling the theory that moviegoers are opting to stay home and rent movies on DVD, the home video rental market was off over 2% for the first half of the year.

Is everyone buying pirated video? Are they sending/downloading it off the Internet? Best way to answer those questions is with a comment from Blockbuster's CEO who noted that the continued poor theatrical performance is having a negative impact on the industry.

That's financial community-speak for most of the movies aren't worth going to see, buying, renting or even stealing.

A different disc format won't change that. If the format disagreement continues it means it will be two years before either has any traction in the marketplace. All of the studios that committed to delivering blue technology (BD or HD) titles this year have already said they will take their seat in the stands and watch the debate play out.

They will continue to knock out titles on present DVD discs as people buy more and more DVD players. They will see what MPEG-4 and H.264 offers them in terms of added content protection on present media. They will look for new channels.

Sure the studios have huge vaults they can mine for money - you know back when movies were really good. But they won't release them on any format without solid DRM (digital rights management) technology. It is available because they have developed it with the help of the software folks and it is flexible enough to work across any media - including IP. It's so good it will take a 15-year-old at least a day to break!

A few are dusting off the golden oldies like Universal Studios with their remake of King Kong. Universal isn't taking any chances on losing their control. With military precision they are protecting their content from the moment it emerges from the vault and delivered to the consumer with all of the DRM protection intact. If it works, other studies will follow suit and not worry about blue laser technology.

In fact, many of the friends - on both sides of the discussion -- are starting to look elsewhere for relief.

The options are out there and the studies are looking at them all. The head of Warner Brothers recently noted that their industry is trying very hard to make sure that what happened to the music industry doesn't happen to their industry. Trust us, they mean business…

That's why they are looking at every option, every opportunity.

The networks, content developers and consumers are becoming accustomed to video on demand across their cable and satellite connections (Fig 1). Slightly more than 11.6 U.S. households have DVRs (digital video recorders) today and by 2009 that number is expected be nearly 47.5 million.


Figure 1

Much as we hate to admit it much of that content will reside in the higher and higher capacity hard drives that are cheap today and just getting ready to die. The intelligent way to deliver the content - not that intelligence has anything to do with it - would be for the content owners to employ a realistic copy approach similar to what Sony's BMG is employing with their music CDs.

Their new technology allows customers to make three copies of the disc and while they admit their solution needs some enhancement it does create speed bumps in casual piracy. Put a little meat on the bones and this could be a solution that delivers the content security they need to deliver content the most efficient way possible. When this happens they will be able to reduce their reliance on their two expensive channels of distribution - theaters/retail stores.

The Dark Side of Discs

Perhaps in their lust for royalties, Toshiba, Sony and their partners, may not have noticed that people are becoming accustomed to downloading. People of almost every age not only in the U.S. (Fig 2) but around the world are increasingly comfortable in getting their music and gameplay over the Internet.


Figure 2

Granted it isn't widespread but a growing number actually watch their movies and video programming over the Internet (Fig 3). This wave of interest - my video, my way, my time - may have gone unnoticed by the blue-ray engineers but it hasn't gone unnoticed by Microsoft, Cisco and Intel. All three are investing heavily into Wi-Fi and WiMax communications solutions. The phone services around the globe have TV and video services on their planning boards. Korea has been delivering IPTV for sometime and it is very successful. The BBC just announced they would offer their program over the Internet for downloading. 


Figure 3

The Comcasts, Times Warner and other cable monopolies see these services as their prime competition over the next five years (Fig 4). Granted broadband video service won't be available everywhere until perhaps 2010 but remember we said it is only a small wave on the horizon…that's the way Tsunamis start.


Figure 4

Intel, Cisco and Microsoft are watching the horizon…not the shoreline.

Second Time Around

Paul Otellini doesn't look like he is a Barry Manilow kind of guy but he obviously hopes that love is lovelier the second time around.

Viiv is Intel's renewed run at hiding their computer chips inside a device that people will want in their living room. The plan is elaborate and Otellini is serious about making it happen (Fig 5). He rolled out the concept, plan and pieces at his first Intel Developers Forum (IDF) as CEO of the company.

Figure 5

Intel is going full bore because they see the writing on the screen. They talk with homebuilders who are installing tech-based systems and they talk with home theater and CE/PC dealers. Not that they don't believe the market research that says people want to control their content on their terms (Fig 6) but they do something really wild…they talk to consumers across the country.


Figure 6

That's why Otellini has given his global team clear marching orders…make it happen in the home and do it the way folks want it. So at IDF they rolled out a wide array of Viiv options (Fig 7,8) including one that looked like a regular set-top box as well as one that might have - just might have - taken it's lead from Steve Job's MiniMac.

Figure 7 - Mini PC Figure 8 - Media Center

Working closely with its partners, Intel will be offering consumers a variety of entertainment solutions that are ready to plug into your HDTV. Some with 1TB hard drive capacity. That's 128 hours of HighDef content which should satisfy the biggest couch potatoes. Sony showed their system last year and Hitachi unveiled theirs recently. You can bet Seagate, Maxtor, WD and Hitachi are following Intel into every OEM with huge bit buckets that will store a lifetime of photos, months of music and seasons of your favorite soaps.

If the DRM-secured content is sent over one of the broadband pipes to the home it will probably be MPEG-4 or H.264 encoded. Assuming the content owners "allow" consumers to make one copy (or two if they are overly generous) with really cheap next generation red-laser MPEG-4 burners and today's low-cost DVDR media, will people really be interested in the blue spat?

People receive and enjoy their content - audio and video - on their terms. The only question now is what type of set do you watch it on?

Digital TV or HDTV? That's an orchestra without a lead singer!!!


DVD Insider #43 -
   -- Next Gen - The Public Be Damned! -- William Henry Vanderbilt
   -- H.264 - If the people have no bread, let them eat cake - Marie Antoinette
   -- You - The jackals are fighting over who gets the biggest slab of meat off the suckers - author unknown

Next Generation or "Hi, I'm From the IRS & Here to Help You."

Suddenly we can't wait for blue laser technology to arrive so we can get beyond the war of words to real products!

Imagine - 5x the storage capacity, sharp, brilliant movies and a real choice - BD or HD DVD. Well yes the two standards are totally incompatible but don't worry they will eventually work out their differences. When they do, you'll get to buy new burners, new players and new media all over again.

Oh we forgot to add that both sides have embraced some super digital rights management (DRM) technology that Hollywood would "like" included before they are going to knock out copies of their stellar masterpieces. The cool and super advanced DRM technologies include digital watermarking, programmable cryptography and self-destruct codes. Don't try and decide which is best for everyone involved - including the consumer - throw them all into the mix!

Don't the three sound like something you just have to buy and put in your home?

Digital watermarking is something they call a ROM Mark. It really only applies to the pre-recorded media you buy - movies, music and games. Don't worry about it because they say you'll never even know it is there. It was used in today's DVD technology but you could easily defeat it just by writing over it with a permanent marker.

Both sides like Advanced Access Control System (AACS) which requires your player to maintain connections to the content provider thru the Internet. If your disc doesn't pass their security check it isn't a big thing. The provider will simply send your player a "self-destruct code" ROM update that will blow up your player. Ok so it won't physically blow up. You simply won't be able to use it until a repair technician reprograms the player. And your entire library of discs that may have been encoded with the broken security may be unplayable also.

That is so cool !!!

Just in case you get past these two hurdles, they've added a third. This is a renewability method that lets content providers implement dynamic updates of compromised code. This is advanced form or CSS (content scramble system) they used before which was defeated in hours after it was released and is called SPDC. Simply stated every time someone cracks the code the encryption algorithm will "learn from its mistakes" and improve the code. That's a challenge no DEFCON hacker can refuse !!!

If these fail Hollywood has a fallback plan when the 15-year-old kid cracks it all…their lobbyists will put the squeeze on congress to "protect us from ourselves." Don't worry their lawyers will continue to have paychecks by suing every Tom, Ricardo and Harriet who might have an illegal copy.

While both sides (and they will continue down their separate revenue - oops technology paths) are determined to win and have lined up an almost equal number of hardware and content providers. They are quite similar technically but dramatically different in the important areas of media structure and write/read techniques.

H.264 - "Pay no attention to that man behind the curtain." - Wizard of Oz

Our personal life has been so preoccupied with the here and now -- MPEG-2 (the dramatic increase of quality storage/viewing over MPEG-2 - VHS) -- that we missed the big picture. There is another standard out there and it isn't exactly "brand new!"

Contrary with what the blue technology folks would like you to believe, they didn't invent the superior storage capabilities of MPEG-4 or H.264. The technology - an open-standard -- has been around since 1998 and it's being widely used…except in storage.

It's big in broadcast and it's big in wireless content delivery. Truth is H.264 delivers the best compression efficiency for a wide range of applications - broadcast or satellite delivery, DVD, video conferencing, video-on-demand, streaming and multimedia messaging.

It is so good that Microsoft developed their own version - Windows Media Video 9 (previously called VC-9 and now VC-1/AVC). From the industry's perspective H.264 is a great codec because it scales beautifully from mobile content phones/devices up to high-definition broadcast. Since it makes efficient use of bandwidth and the distribution spectrum, H.264 broadcasters have already begun using the technology to send digital TV. It will be an efficient technology for them to use when they begin streaming video across the Internet to your home.

In their leading edge fashion Apple integrated H.264 into the Mac OS and QuickTime early this year and frankly we never even noticed the news. So this past weekend we visited an Apple store to see if it was as good as their web site PR said it was. It is darn good!

Even though you who are already Mac diehards know this, the "real world" doesn't. But the sales person also showed us how we didn't have to wait for blue ray technology to store and play back - high definition DVDs. Mac users simply use Steve's DVD Studio Pro to write the high def content to a regular DVD+/-R disc. It was a COMPLETE high def movie and nothing was lost in the writing…everything was there!

It was almost enough to convert us from Windows to Macs…almost.

The problem was that you could only play the high def DVDR disc on the Mac system since there were no MPEG-4 or H.264 players available. But with the number of chip people making combination MPEG-2/MPEG-4 - H.264 chips it shouldn't be too difficult to produce a combination player that reads the discs as well as a DVD recorder that writes huge volumes to today's DVD media …should it?

"I'm mad as Hell, and I'm not going to take it anymore!" -- Howard Beale in Network

There have been a number of research reports recently that have come to the conclusion that we aren't interested in upgrading to the next generation of DVD technology - burners/media. But then all too often we don't know what we want.

We didn't know we wanted: stereo instead of mono CDs instead of LPs or cassettes Stereo TV or HDTV DVD instead of VHS Digital or MP3 Audio Digital instead of Analog photos, film We did want: pictures on radio color TV to replace B&W We got: CD and DVD-Video Personalized, Customized Audio, Video CD and DVD Photos DVD quality TV, time-shifting, archiving, playback

But deep in the back of our mind, we know we don't want someone tell us that the product we just bought is going to be replaced by something yet to be defined, that is marginally better than the product we have today and at a significantly higher cost.

The fact is that the total HD TV set universe is still below 15 million. Only a small percentage o these sets actually receive over-the-air HD broadcasts. According to CEA president Gary Shapiro that in 2004 only 1.5 million integrated TVs and 475,000 set-top DTT receivers were sold to dealers. These include all forms of HD (cable, satellite and DTT). And unless you're really into sports and watch ESPN regularly the chances that the stuff you watch on your HDTV is really HD is pretty slim.

More importantly, what if you have a decent size library of DVD movies that you've bought or are one of those folks who use the NetFlix "Burn and Return" program? Even if you go to a blue recorder/reader and HDTV set you are still going to be watching DVD (MPEG-2) quality. And will Hollywood upgrade their vast DVD library to High Def or continue to encourage you to buy from the current catalog?

The differences between High Def and DVD aren't as dramatic as they were between DVD and VHS. So the big question will be how much will people be willing to pay for that slight improvement or will there be an option.

Perhaps it might be better to have a low-cost burner and/or recorder that wrote your high def content to your present sub-$1 disc? Say perhaps writing in MPEG-4/H.264? You know one that could also write your regular MPEG-2 content to the disc you've just begun using regularly?

We expect to see a few of these hit the market this next year. In fact you may see them at the January CES show.

Prices? Heck we don't know. But logic says they shouldn't be too much more expensive than today's DVD burners because the only change is in the combination codec and the unique selling proposition?

Great but you are probably worried that the discs won't play in anything but your PC -like today's Mac G5? No guarantee but if we were the manufacturers we'd offer stand-alone MPEG-2/-4/H.264 players for perhaps $50. Or perhaps a starter bundle…you know burner and player for say $200 - $250. Both have got to be less expensive than the blue technology units will be whenever they hit the stores. In fact they probably won't reach that price point until 2007. Of course the blue media will have to come down a long ways and that will take even longer.

This type of combination MPEG-2 and H.264 would make all of the news releases on "mine is better than yours" a moot point. In the blink of an eye consumers could take back control of their choice as to what they want to buy. After all, you've already lived through the DVD+/- war of words and the upgrade path should be relatively economic, relatively painless.

Of course this doesn't take into consideration the DRM issues that Hollywood has and which are valid if that's your business. You can be certain they will turn their attention to the issue once people start buying the high def burners in quantity. As the Wizard said, "Do not arouse the wrath of the great and powerful Oz."

But this might -- just might -- be a simple solution that the next generation royalty owners overlooked.

Imagine if Apple once again showed the way and QuickTime became the player of choice…Jobs just might be onto something !!!!


DVD Insider #42
- Beta Will Change the World / High Def - Plugging All the Holes Before / How Much Mobile Do "We" Want

Microsoft once again proved that the most valuable word in the advertising world is "FREE!"

With their usual aplomb the said they were finally going to release Longhorn. But since they have missed so many target dates for the product, they decided they better change the name to Vista. Since it was now a "new"/different product they would only be able to rollout a beta product. And that they would only let people who had no lives take a copy off MS's hands…for free.

Every tech editor/reviewer worth his/her salt has a copy, has spent hours rebooting it and writing about it. Every 3rd party software engineer has his/her copy. Every 12-15 year old geek has his/her copy. One copy each was downloaded in China, Russia and India.

People are writing about and bitchin' about what it has…what it doesn't have…what it should have…what it should eventually become.

It is brilliant marketing!

They tell you right up front it isn't very interesting and there's not much to it. But ask you to waste your time tell them exactly what you'd like it to ultimately look like, feel like, act like and be. Like the infamous Apple Lemmings ad all of the technical dignitaria rush forward to prove that…well to prove something.

MS will take all of the valuable research and development work you provide, analyze and prioritize it at the Redmond campus, add the top 10, put out another beta for these folks to test, review and provide feedback on.

After billions of column inches and 10s of thousands of free techie testing and detailed analysis a final gold copy of Vista will be released in 2007???

Hundreds of millions of licenses will be sold. Millions will be copied. We will declare that everything has to run on Vista. Because that's what "everyone" is using!!!

At that time we'll have the same conversation we had a few weeks ago with the president of a PC User Group…"Does the software run on Win 98 because that's the OS a lot of our members use?" And…"Can you burn CDs with it because many of our members use Adaptec CD Creator?"

The industry is so far ahead of the mainstream we often forget that ordinary mortals are where the real profits lie.

Don't think so?

Let's look at the numbers:

  • In the U.S. there are about 150 million households and worldwide what 8-10X?
  • PC sales WW this year - about 199 million U.S. homes with broadband - '05 - 42.3 mil; '10 - 77.6 mil
  • WW DVD recorder sales in '05 - 21 mil
  • WW DVD drive sales in '05 - 63 mil
  • HDTV sales WW - '05 - 15.5 mil; in '09 - 52 mil
  • 85% of U.S. homes have at least one DVD player
  • Cellphone sales WW in '05 - 750 mil
  • U.S. installed base of audio players (iPod, etc) - '05 - 41.6 mil; '09 - 67.9 mil

Panasonic reportedly has 60% of the plasma TV sales. Sony has 60% of the game system market. InterVideo's WinDVD has about 150 million users worldwide. There is an estimated 15 million video post protection seats (HW/SW system) in the world.

The collective industries (PC, CE) are cherry picking. They sell the early adopters and the community influentials. These in turn sell the risk-takers. Slowly and painfully the products move to the safe-buy folks.

The industry's marketing folks follow the phone solicitation and spam/phishing rules of engagement - hit enough households or PC screens and you'll make enough hits to make it profitable. Then they focus on selling those same folks more neat "stuff" and show how quickly we're penetrating the market. Ultimately, they drop the price to the point where it becomes an impulse or "what the H***" buy."

Explain, inform, educate? Who has the time or the desire? In our "leave no child behind" climate we've found that this takes time and money. So, let's just skim the cream off the top and then move on to the next cup (generation of technology).

Let's use another example near and dear to our heart…DVD.

You read the results of the BD and HD "third party" consumer studies done among early adopters. Surprise…each won their respective study.

But look deeper:

  • Which do you like, Blu-ray or HD-DVD? 58% said Blu-ray
  • What is the difference between DVD+, DVD-, DVD-RW? 58% didn't have a clue
  • How do you program your VCR? Surprise…58%
  • Which do you like, HD DVD or BD? 47% liked HD
  • If two separate incompatible formats are available which will you buy? 45% will sit this one out

But by the time Hollywood has its way with the standards and Congress you may not care if either technology emerges….

What Neither Said

Content owners sit in both camps. Their participation has nothing to do with supporting one format…or the other. What they don't want is another CSS fiasco. They are covering all of the bases before content is made available. They are working to ensure unauthorized copying, playback and distribution of HD content.

They have and are working on copy protection schemes to cover every scenario!!!

HD contents will include copy control information Before the start of recording, copy control information within the digital broadcast signal is detected. If copying is allowed, (after content authentication interactivity occur as explained later) the contents and copy control information are encrypted and recorded on the disc During playback, the recorded contents and copy control information will be decoded and output only from a device on which the contents protection technology is installed High Def broadcast content will be protected with a 128-bit key that will change hundreds of times during playback Unique ID code will be required or each disc (and disk) and each legal recorder/player will have a device key and RKB (renewable key block) the content protection technology will be implemented in the interface that will output playback content TV sets will have to be equipped with a HDMI digital interface if you are going to enjoy content in the High Def format or the TV will downgrade the image to 480p Recently perpendicular recording was announced for hard drives that will first be used in the very small (1-1.8-in) drives. Hollywood is now looking at how they can dictate, legislate or manage DRM (digital rights management) on the high-capacity drives that will be implemented in portable devices - AV players, multi-purpose cell phones, notebooks, huge capacity TV recorders. You know Hollywood is already holding "strategy" meetings at Seagate, Hitachi, Maxtor, WD and Toshiba. Can't wait to see the new toys at January's CES!

With the recent Grokster win under it's belt, Hollywood, the RIAA (record folks) and IFPI (International Federation of Phonographic Industries) continue to press their "sue the bastard!" strategy which is having an effect at the manufacturer, portal, software and consumer level. The gun-to-the-head approach has corporate attention.

More importantly, consumers are showing that they are interested in doing the right thing without the threat of being drug into court (oh sure there is probably some concern but…).

Mobile Everything…Maybe

Our household is like yours - "typical." We all are increasingly connected but online activities vary…it isn't all music downloads and stealing videos (Fig 1).

 
Figure 1

  • For us, the laptop is a business tool (fig 2)…staying in touch.
  • For us, the longer battery life…the better. High-speed and WiFi access…don't even ask.
  • Our wife uses her phone/PDA tracks the stock market with a fervor and has been known to go online in a store to comparison shop.
  • Our son goes on a daytrip with his MP3 player, BlackBerry and cellphone.
  • Our daughter is really into IMing, uses the camera in her cellphone regularly


Figure 2

It's typical use of technology in a technology hotspot. But hotspots aren't the ROW or the sale of PC and CE products would more closely parallel census numbers.

Despite the hopes and fears of Hollywood, their content doesn't seem to have the wholesale appeal and/or danger of being sent and downloaded everywhere. The early adopters have played with video downloads and found them either less than exciting or disruptive to their multitasking. News, music, personal contact…that's a whole different ballgame.

While the RIAA may take credit for people increasing the volume of legal music downloads (it has tripled this year) but the fact is the new services have gotten better at their offerings and payment options. It's no wonder that Apple is rumored ready to launch its own cell/iPod and the mobile telecommunications firms are in heavy discussions with the content providers to get their piece of the music download pie (Fig 3). But storefronts are not in danger of going out of business because most of us will continue to buy CDs.


Figure 3

Video download is immensely popular in Japan, slightly popular in Europe and has been greeted with less than enthusiasm in the U.S. According to a recent In-Stat report only about 1/8th of mobile phone users are interested in buying mobile video content and 2/3rd weren't interested at all. Not that it is anything to sneeze at because customers will go from this year's estimated 1.1 million to 30 million in 2010. But that's still way short of the number of people who want to download music.

Two areas the industry will have to address sooner rather than later are the growing interest in online gaming and gambling. Lots of honest and unscrupulous folks are ready to meet the demand but how do we manage age verification and monitor problem gamblers when we are having such a difficulty in controlling identity theft?

If mobile device manufacturers, software producers and P2P providers don't solve it you can bet governments will !!!


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