DVD Insider #45

– HD is Everywhere
– Screen Options Becoming Aggressive
– Delivery Battle Could Be Brutal

“The day I made that statement, about inventing the Internet, I was tired because I’d been up all night inventing the Camcorder” — Al Gore

Al Gore was quick to admit he slightly overstated his role in developing the Internet. But in joking at his own expense, he probably didn’t realize how prophetic his statement would be by linking video with the Internet.

All of the professional level products hardware and software at this year’s IFA and IBC conferences focused on producing and delivering high definition content movies, television, music. Now that Gore’s Current TV is a growing cable network he’s probably watching the rapidly developing IPTV arena and keeping his Internet options open.

Thanks largely to government regulations, HDTV content development and delivery have moved fairly rapidly in the U.S. since 1994. Europe on the other hand chose to let the market set the pace for conversion and there was only one channel delivering digital content in Europe in 2004. Service expansion has been painfully slow so the need for HD TV sets has been mired in high cost and lack of interest. England’s BBC has been one of the early adopters so European broadcasters are watching their progress before they jump in with breathtaking content.

High Def TV set sales are experiencing considerable growth in the Pacific Basin (Figure 1) but for a change sales in the area lag behind those in the U.S. Europeans are certainly interested in high def big screen viewing and the set manufacturers and European retailers are convinced that the soccer World Cup will be the key decision point for many households. Then European consumers will face the same challenge U.S. buyers face a dizzying array of sets and techie points that will totally blow your mind.

Television enables you to be entertained in your home by people you wouldn’t have in your home David Frost

Even though our rear projection “HDTV-ready” set isn’t that old we decided it was time to replace the huge piece of family room furniture with one of the sleek flat panel sets you see “everywhere.” Trouble is what self-respecting American family sits down and watches TV together anymore? So multiple idiot screens meant we could:

1. move the big set into one of the kids rooms which would mean they couldn’t have anything else in the room (like a bed)
2. buy a flat panel set for each of them (like that ain’t gonna happen)
3. upgrade them to an option

That was an easy decision because they already have powerful InstantON entertainment notebooks. Kids were raised by TV and they entertain themselves with their computers, the Internet and cellphones. When we were growing up and happened to say we were bored the old man solved the problem he sent us outside to work and you did…or else. But in today’s civilized Wi-Fi homes, kids fill their time watching videos and movies on their systems in their rooms, by the pool and probably even in class. In addition, our kids have ADS Tech TV tuner cards to prerecord shows when they left their systems at home and attached to our media center PC.

According to In-Stat (Figure 2) they are in the majority since the sale of entertainment-ready notebooks has surpassed the sale of “plain old” PCs.

So simply by adding 21-inch LCD monitors they had everything they needed for IMing, web research, streaming video/audio, email, digital surround music and oh yes…schoolwork. That was easy and the picture looked better than large screen set in the family room …and they had room for furniture!

Television has proved that people will look at anything rather than each other –Ann Landers

Picking a new flat screen HDTV sounds easy enough…look at the picture, ask the price, take delivery…yeah right!

First you have to decide if you are going to go with plasma or LCD flat screens. Worldwide LCD sets outsell plasma systems three to one (Figure 3) but we were going to keep an open mind. Until recently the flat panel displays have been extremely pricey. But with everyone entering the market including Dell and HP prices are plummeting. By mid-next year when several Asian plasma and LCD plants come on line prices will get brutal.

But when your wife wants to remodel the room and have the FCC’s version of HDTV to watch HGTV you do what is required. While that’s part of the population makes the decision most of the purchases are made because of intellectually-stimulating HD programming like Nascar, football, golf, tennis, baseball, boxing and soccer.

Next you have to decide if you are going to buy on-line, from a storefront or a home theater provider. If you don’t know enough to be dangerous, on-line is a tough road. If you like the idea of a home theater solution you realize you are abandoning your room to something terribly expensive and unless you are really serious about TV it will be used as much as a formal dining room. The home theater room may be cool but most of the movies you watch over the next year or two will be … plain old DVDs!

Going to a storefront Best Buy, CompUSA, Good Guys, Target, Costco, Wal-Mart, Fryes (oh heck anywhere!) is not a task for the faint of heart. It’s worse than buying a used car. At least those folks know they are lying !!!

While prices are in free fall for large flat screens (anything over 40-in is considered large), they definitely aren’t an impulse buy. What sold for $25,000 a couple of years ago now sells for $2K so they are low and getting lower…fast! When the multi-billion dollar LCD facilities come on line pricing competition between plasma and LCD will be brutal. Price erosion is something you learn to live with.

All you have to do is make a few choices: technology, size, aspect ratio, resolution, brand, channel, tuner, and so forth.

With all of your content going digital (Figure 4) the set isn’t just a boob tube anymore. It’s a part of your total entertainment experience.

I’m beginning to believe that it won’t be terribly long before it will be quite commonplace for people to use the Internet to pull up real-time video, or video-on-demand — Vinton Cerf

The TV set in a growing number of homes is not just for couch potatoes. It’s part of the pretty complete, pretty good and pretty challenging home network and entertainment solution. According to the Diffusion Group (Figure 5) more than 17 percent of the U.S. households have home networks followed by Japan and the U.K. respectively. As UPnP connectivity becomes reality rather than wishful thinking that number will increase dramatically.

It’s no wonder that home entertainment PCs and notebook sales are increasingly so significantly this year since people are connecting everything to their systems and networks (Figure 6).

The Internet is so big, so powerful and pointless that for some people it is a complete substitute for life Andrew Brown

With the growing availability and use of broadband households seem to be expanding their multitasking. According to Forrester Research we are using DVRs to control how and when we watch TV. As long as you can avoid Macrovision and content management solutions you’ll be able to not only extend that viewing time and even archive the shows. The rest of the time people are on-line doing almost everything web surfing, listening to digital music, banking, shopping and streaming video.

In fact, with video over IP gaining so rapidly most of the Telcos are looking closely at Korea’s IPTV model which is extremely successful. The interest and support for IPTV by Microsoft hasn’t gone unnoticed by the cable and satellite companies. Or for that matter your local electrical utility that also has a pipe into your home.

We didn’t have any say in the court’s decision to bust up Ma Bell years ago in the name of “competition.” The idea of one phone company and one bill was easy to understand, easy to manage. So the revolutionary concept of one service provider, one bill has been reborn but this time with competitors (Figure 8).

We’ll give you a hint as to our leaning. We never did like Jim Carrey in The Cable Guy. Granted we did cheer when George Seigel and Jane Fonda took on the phone company in Fun With Dick and Jane. But given a choice between dealing with the cable company or phone company…we’ll vote for the good old days!

But the fight for our voice, music, TV, video on demand, phone and internet connectivity is going to be aggressive over the next few years. Suddenly we’ll have competitive offerings. Then all we’ll have to figure out is how to get around the digital rights management solutions that Hollywood and the networks want in place before they release their super stimulating content and expand our NAS storage system.

By the time that is worked out we’ll be trying to store and enjoy our High Def video content. Either the Xbox or PS3 game playing systems will be in use to entice Hollywood to share their content with us on disc. Or maybe the question may just be moot and we’ll be downloading our movies when we want, where we want.

Then you’ll be able to remember how rough you used to have it when you were growing up…having to run to the store to return the movie on time or waiting for the postal person to arrive with your new selection !!!!

DVD Insider #46

– Phones, Snapshots, Music
– Mobile Video
– A Little Bit of Storage

Once when we were young our parents took us to visit the Grand Canyon. We sat on the edge of the gorge and watched the sun dance across the etched landscape and the clouds overhead. We sat there for more than an hour listening to absolutely…nothing!

In today’s ADD world people would swear you were on drugs if you did that…sitting there that long, looking at and listening to nothing!

If we were to do it now we would have to have our digital camera and our camphone as well as our iPod as well as our PSP and notebook hoping there was a WiFi hotspot close at hand. That way you could take a good photo with the camera and grab some snaps with the camphone to send shots to people halfway across the country to show them the huge hole in the ground. The MP3 player and PSP are just for entertainment because how long can you listen to the wind or look at erosion?

Change is Constant

Multitasking and constantly being in touch is expected, accepted. Or as Peter Drucker said, “everyone has accepted by now that change is unavoidable. In a period of upheaval…change is the norm.” We are becoming so connected, some are beginning to wonder aloud if we are becoming less connected.

We can’t go too long without checking email. Our cell phone is on 24×7 (on vibrate in meetings/public events and off on plane trips). Music fills our office during the day while others in the office listen to Internet radio while working. Our CFO has a small window on her system open all the time monitoring the stock market.

Silence and solitude are more distracting than chatter and commotion.

It is no wonder that portable devices are in such high demand and are the technologies we expect to upgrade most frequently (Figure 1). According to InfoTrends, more than 740 million mobile phones will be sold worldwide this year and 50 percent will be camphones. By 2009 at least 85 percent of the mobile phones will have at least camera capabilities

Different But Equal

Kristy Holch, group director of InfoTrends, noted that household penetration of digital cameras still surpasses camphones in the U.S. where they have only recently taken hold (figure 2). She points out that there is a big difference in units sold, household penetration and usage. For example in our household everyone has upgraded to a camphone+. The kids use theirs for video clips which they arduously save to their notebooks or send to friends. The wife uses hers for remodeling ideas and impulse shots. We use ours for our IMing and …calls! But we share the digital camera when we want “good” photos.

We expect to use our cellphone for more but we’ll see what the next generation of units offer. And if you believe all of the announcements out of IBC last month, CTIA this month and even the InfoTrends Digital Imaging Conference; next year could be the year.

Just a “few” issues to be worked out but we’ll come back to that in a minute because while video is on the horizon, music is here and NOW!

The Music Play

Hardware, software, content owners and service providers are saying what Estelle Reiner (mother of Rob Reiner) said after watching Meg Ryan explain intimate relationships in When Harry Met Sally…”I’ll have what she’s having.”

According to a recent report there are more than 75 different MP3 players available…and more on the way. It simply proves how well Jobs has built the image for iPod and iTunes.

While Apple still has the biggest chunk of sales, everyone is bent on becoming their replacement in a rapidly growing market (Figure 3).

But buying download music shouldn’t be any more difficult than going to the grocery store. The problem is that the iTunes music Store, MSN Music, Napster, Real’s Music Store, Rhapsody, Sony Connect, Yahoo Music, Amazon and the rest have different protocols and don’t sell the same bundle of bits. They have to deal with the licensing organizations to have the right inventory and after all of that your store(s) may not have the artist, album or song you want.

Whether your “service” lets you buy it once or rent by the month, they each have their pros and cons. And the number of subscribers in both camps is almost the same. Then too there is always the manufacturers’ bigger-is-better sales proposition giving you more capacity in a smaller package.

What drives the hardware and service frenzy are the facts (gathered from IDC, Forrester, Informa, Gartner) that: 50% of dig music player owners have less than 100 songs on them 1000 songs are enough for 90% of music lovers 13 bln songs available on peer-to-peer nets 16% of online adults buy 99c tracks, 17% choose subscription 46.4 mln digital music players were sold in 2004, 132 mln will be sold in 2009 iTunes sold its 570,000,000th digital song in Q3, ’05 Apple sold over 21 mln iPods in Q3, ’05 Brits bought 5.26 mln music tracks in Q1 ’05 and 2.5 mln in the last 2 months By 2007, 1/3 of music will be sold online Music subscription services will generate $890 mln in 2009 Online music market will reach $1 bln this year, $4.4 bln in 2008

You would think the music industry would be excited about the download channel but it is still bent on suing its customers into submission. The RIAA renewed its music lawsuit efforts across the country and has racked up more than 14,000 suits since Sept 2003. The suits have dried up a number of online sources and have reduced traffic at others. Kaaza user numbers are down dramatically as are those of eDonkey.

Content Offerings

Despite the less than overwhelming acceptance of Apple’s Rokr musicphone, mobile convergence is coming and it will continue because everyone sees $$$$$.

Depending upon the carrier and the amount of money you want to spend monthly; you can already download ring tones (about $450 million in the US this year), play interactive games, use GPS services, conduct multimedia messaging and more. It’s easy to see why service providers can give you a camphone+ with your service contract because multimedia drives usage minutes and produces really big service bills (Figure 4) and it will only get bigger!

The potential is almost overwhelming and is certainly irresistible. We publicly discuss and plan for cellphone photo exchange, personal videos, movie services and even TV. In the Pacific Basin and Europe consumers already spend tens of millions of dollars on phone-based pornography. Just remember what Bill Maher said and double it for your phoneporn…”TV sex channels don’t expand our horizons, don’t make us better people and don’t come in clearly enough.”

Yankee Group estimates that mobile phone pornography will be a $196 million by 2009. The “service” sales will still be well shy of the projected $1.2 billion for ring tones…but it will ring someone’s chimes !!!

The range of mobile content and cellphone usage is amazing and is rapidly gaining momentum (Figure 5) around the globe. While the types of usage varies from area to area; music, multimedia images, music and games lead the types of content accessed. These are followed by news, sport clips, movie previews/video clips and full feature films.

Best of all the service providers offer flexible payment programs – deduct from pre-pay credits, SMS or call to premium rate number, mobile WAP site, add to monthly bill, web site transaction, subscription, credit card payment.

Mobile TV

Whether it’s IBC, CTIA, CEATEC and we’re certain this year’s CES; the second big thing (right behind home entertainment systems/networks) will be mobile TV. It sounds cool. It sounds exciting. It sounds like profits. It sounds like another technical hassle.

While countries like Korea, Japan and areas of Europe have deployed or are testing it already technobabel reigns. There’s DMB (Digital Multimedia Broadcast), DVB-H (Digital Video Broadcast-Handheld) and Qualcomm’s MediaFLO.

We have gone from “why would anyone watch TV on their cellphone?” to everyone getting their horses in shape for the race.

If you think home networking is a tough puzzle to solve you should see the IPTV Rubik’s cube – frequency availability, network planning, infrastructure cost to handset antenna design, availability of interoperable TV handsets, country-by-country backroom politics and SIGs. Then there are also the DRM issues as well as content licensing and residuals.

Hey we’re talking serious bucks here!

Storing It All

“We aren’t in an information age, we are in an entertainment age,” Tony Robbins.

Folks who have MP3 players or digital cameras have it made. A GB of flash memory can store 250 songs or 1000 4Mpixel photos. If they have one of the new PMPs (portable media players) they can store 15 hours of MPEG-4 or 4.8 hours of DVD video.

For these types of units flash will probably be sufficient. They are extremely rugged, are shock resistant and require very little power. In addition, the capacity is doubling annually, prices are dropping 40 percent every year and they already give low capacity 0.85-inch HDs a serious price/performance run for their money. (Figure 6)

But we aren’t talking ordinary people here. We’re talking the always-on, always-connected society! InfoTrend’s Kristy Holch sees the camera/camcorder market growing steadily as video podcasting takes off while the camphone will quickly evolve into a gotta have infotainment tool that is an individual’s constant companion. The morphed phone will take its place next to the laptop as an always with you work, communications, entertainment device (Figure 7)

The drive industry has never shaken it’s Al Shugart, Finis Connor heritage…they eat their young!!!

The 14-inch drives begot the 12-inch begot the 8-inch begot the 5.25-inch begot the 3.5-inch begot 2.5-inch begot the 1.8-inch begot the 1-inch begot the 0.85-inch. With each new member of the family they got faster, higher in capacity, tougher (not invulnerable) and cheaper.

While chips are eating into the 0.85-inch product applications, the drive manufacturers are far from worried about their livelihood. What they are doing is redefining where hard drives fit (Figure 8).

People are grabbing and packratting everything – videos, photos, music, emails, web data, ??? — and that spells big storage that right now only the hard drive can provide. Much to the delight of drive manufacturers like Seagate, Maxtor, WD, Hitachi and Toshiba the future looks bright…not hugely profitable but bright.

These firms develop new, higher capacity HDs in each of the form factor categories even before the latest has hit the streets. Just when they looked like they were running out of writing space they found a new mantra…perpendicular recording.

They scour the backstreets of all of the usual target cities pushing mobile everything. While the 3.5-inch drives is the commodity market (Figure 9), the 2.5-inch and sub-2.5 markets will be their future. Especially with the new intelligent shock protection that kicks in when the device falls just a few inches.

To paraphrase Field of Dreams…”If you build it, they will fill it.”