TPEG Site up and running.
Here is their premiere report:
AT-Report Premier Issue!
By Barry Sandrew, PhD, Executive VP/CTO
The IAT-Report No. 1 - Time-Shifting Television
The Emergence of Video Servers in the Living Room
Section 1: Introduction
Section 2: The Technology of Time-Shifted TV
Section 3: Silicon Valley - Golden Geese or Silicon Valley Placeholders?
Section 4: Emerging Competitive Playing Field
Section 5: The True Impact of Time-Shifting on the Television Industry
Section 6: The Impact of Convergence on the Internet
Introduction
This is the first of many bi-weekly IAT-Reports that will attempt to examine
trends in emerging technology and offer insight into our particular slant on
related opportunities for TPEG. The information contained within these reports
should not be construed as a definitive indication of TPEG's current activities,
strategic partnerships, mergers or acquisitions.
This first installment examines exciting new developments in the convergence of
television and the Internet that will inevitably supplement PC-based on-line
access with a new type of web-connected TV. This clear trend away from the
PC has implications for handheld PDAs as well as wired and wireless
devices/appliances (pagers, data phones) which will be examined separately in
subsequent IAT-Reports. TPEG is currently looking at companies developing
software applications and hardware innovations that cut across these platforms,
thereby achieving the greatest market share.
One technology trend that we are watching very closely is Time-shifted TV; an
enabling technology that will put interactive TV in our living rooms this year and
promises to profoundly effect in the entire television industry.
Consider the following:
1.You're watching a live NFL game and the Chargers are about to make
a touch down... when the phone rings.
2.You push the pause button on your digital video recorder (DVR) and
take the call.
3.While you're on the phone the live TV programming is automatically
being recorded to the DVR hard disk at DVD (MPEG-2) quality
resolution.
4.Once off the phone, you return to watch the game... exactly where you
left it.
5.You decide instead, to catch up with the real-time action of the game so
you fast forward the action, skipping through commercial breaks to the
Live game. When you've caught up with the live action the DVR stops
recording.
Just a fancy VCR?? The concept is called time-shifted television and if you
ask Kleiner Perkins Caufield & Byers, Paul Allen's Vulcan Ventures, Steward
Alsop's New Enterprise Associates, International Venture Partners (IVP),
WebTV founding Director Randy Komisar, Tribune Company, Netscape
co-founder Marc Andreessen and other notables you'll develop a different
perspective on the concept. These blue chip investors have put their support
and significant investment dollars into a new technology that places the video
server comfortably on top of the living room television set.
Silicon Valley understands that time-shifted television is one of the most
exciting trends to surface within the consumer television industry in
years; a trend that has the potential of changing our TV viewing habits
and significantly affecting the entire broadcast, cable, and satellite TV
industries. Time shifted television will become the new buzz term this year.
The Technology of Time-Shifted TV
These consumer grade video servers are set-top boxes that store real-time,
digital encoded television programming on their hard disks and permit
instantaneous fast forward, reverse and the ability to pause live broadcasts.
They also include intelligent software that can actually learn and anticipate the
viewer's TV-watching habits.
You only need to program the system once rather than weekly to automatically
record your favorite shows. The system will automatically search for and
record preferences like (for instance) all those splendid colorized Humphrey
Bogart films (how did they do that?) or every black and white movie
directed/produced by Woody Allen (why did he do that?). The devices
time-shift the viewing habits of the consumer making program
scheduling, networks and traditional advertising a thing of the past.
Forrester Research Inc. is predicting that consumers will buy up to 14 million
DVRs or DVR-enabled TV sets in five years as box prices drop. Paul Kagan
Associates Inc. forecasts 7 million to 9 million DVRs by 2002. According to
Larry Gerbrandt, a senior analyst at Paul Kagan Associates Inc., The
Digital-VCR market is a "...battle for the most valuable square foot in America.
Eighty-two percent of television owners also own VCRs, but only 10 percent
regularly use them to record programs. That little space on top of people's
TV sets is huge."
This is much more than simply a VCR on steroids. When combined with
the Internet we see this technology as the single most significant step
toward interactive television in the past decade.
Silicon Valley-Golden Geese or Silicon Valley Placeholders?
The two companies behind this trend, ReplayTV and TiVo have become the
golden geese of Silicon Valley startups. Both companies have remained totally
focused on their March/April launch; vehement in their effort to keep their
systems and consumer message as simple as possible. Neither ReplayTV nor
TiVo offer Internet connectivity and both companies deny any interest in adding
on-line features because they feel it sends too complex a message to the
consumer.
However, underestimating the consumer could be a fatal mistake since
several competitive players expecting to launch later in the year will
include fully integrated, Internet systems at the same or lower prices.
Though their core technology is very similar, ReplayTV and TiVo can be
differentiated on the basis of hardware/software specs as well their individual
business models. ReplayTV has been touted as having the superior technology.
Their feature rich menuing structure and sophisticated hardware (better set-top
oriented footprint, no fan and better noise dampening) has pushed them to the
forefront as the more advanced consumer device.
The TiVo interface is more of a stripped down menu looking like an operating
system that breaks content into preset channel listings. Compared to ReplayTV
it has much less customizable features for the user. The TiVo demo models I've
seen were large, industrial and clunky. In the simulated living room at their
headquarters you could hear the cooling fan and the drives clicking away,
creating a serious distraction. I have no idea if that demonstration was a
reflection of their final product.
As for their business models; TiVo, is starting out with a subscription-based
model priced around $10 a month. Each night programming guides are sent to
the box via an auto dial-up telephone system (both TiVo and ReplayTV boxes
require a non-dedicated telephone line). At the same time that the TiVo boxes
send information to the home, it also downloads information from the box
signalling the previous days viewing habits of each household. That data is used
to target commercials and other programming so it can better hold the viewers
interest (and more effectively enter their wallets).
Replay's service will be free. They're using an innovative model similar to a
Web portal but applied to the television market. They collect fees from various
networks (like Nickelodeon and FOX) in return for promoting their
programming on the ReplayTV box. This is a very simple model that doesn't
reach into the viewers pocketbook. Marc Andersson, one of the investors in
Replay and a founder of Netscape commented, "Think of ReplayTV as a
portal for television. Browsers brought the Internet to millions and portals let
people personalize and manage that on-line chaos. The Replay Network
Service will provide a portal to personalize and manage the chaos of thousands
of hours of television programming raining down on people daily."
Both models will ultimately be refined as consumer reaction is guaged.
However, TiVo's entry business model may be doomed at the start if you listen
to some analysts. Seamus McAteer of Jupiter Research states "I don't think
that now, or even two years from now, advertisers will be interested in
targeting TiVo's 40,000 or so subscribers. It's a more convoluted business
model. Replay's is far more straightforward."
True, there has to be a critical mass in order to attract advertising dollars
and that threshold won't be reached for some time, particularly if the
looming competition offers more compelling products that includes fully
integrated Internet content.
Emerging Competitive Playing Field
It's curious that neither of the companies that are leading this charge has not
publicly embraced the critical component of this huge opportunity... the
Internet. ReplayTV is widely considered the leader in this arena, though it will
be difficult to maintain that advantage. There are others entering center stage,
creating what will become a very exciting and competitive field of players, all of
which is good news to the consumer. Especially since the competitors will
be rapidly developing products with a true convergence value add. TPEG
anticipates that these devices will make possible the introduction of Internet
rich, non-linear viewing experiences without dramatically changing the
traditional programming format.
Entering a bit late is Microsoft's WebTV, which has a deal with Echo Star
Satellite TV to incorporate both Internet access and DVR capability into its
boxes. They expect to begin shipping this spring. At first only the pause and
instant replay features will be available, with full functionality rolling out this fall.
"We're the first to have a product shipping with a satellite service," says
WebTV's Senior VP of Business Development Bill Keating. "That's a big
differentiator." That, of course, coupled with Microsoft's muscle and market
cap.
Let's revisit our initial NFL TV viewing experience adding the full potential of
time shifting technology and on-line capabilities.
1.You're watching a live NFL game and the Chargers make a touchdown
2.The Chargers Web URL flashes on the screen offering stats on the
player that made the play, the moving point spread, etc
3.You pause the live TV broadcast and travel into the Charger site to
search out info of personal interest
4.While you're there you decide to purchase a team jersey and buy tickets
to a local game... oh, and isn't that the new Lexus SC300 body style
advertised on the site?
5.When you're done exploring football stats, making impulse purchases
and checking out local car dealers, you return to the broadcast exactly
where you stopped it and continue to watch the game without having
missed a bit of the action.
This is the true significance of time shifted television.
The WebTV-EchoStar receiver sports a built-in ultrafast, multi-gigabyte hard
drive capable of recording and playing back simultaneously full-quality digital
video. The disk drive makes possible a number of enhanced digital TV
features, including TV Pause (“freezing” a TV show for up to 30 minutes and
resuming when the viewer is ready to watch). Other features include a program
guide and broadband (satellite) data delivery.
The WebTV-EchoSTar device, scheduled for a later launch is expected to be
available as a WebTV Plus and EchoStar service upgrade. It will feature
automatic recording of several hours of digital video and down-loadable video
games. The programming guide will link Internet content with programming
found in TV Listings; providing access to program-related information up to
seven days in advance. The TV Recent feature saves thumbnail pictures of the
last six channels viewed. The satellite receiver provides access to over 300
channels, including broadcast networks, sports, international, and pay-per-view
programming. Finally, the set-top box features a printer port for printing out TV
listings of upcoming shows or e-mail messages, and provides parental blocking
capabilities for both Web sites and TV programs.
Neat stuff... and miles ahead of the TiVo and ReplayTV offering. It's not that
TiVo and ReplayTV couldn't bring the Internet into their box. While there are
currently no customized browsers in either TiVo nor ReplayTV, all the core
technology required to connect to the Internet are incorporated within each
system. Both companies simply want to keep their launch simple... a move that
appears very short sighted. However, I believe that the momentum of this
competition will signal an inevitable move to complementary on-line services.
Otherwise I see no way that ReplayTV and TiVo will be able to compete.
WebTV is not alone in entering this market. Also entering the fray are Sony
and JVC who have individually set their sites on a year end launch of set-top
boxes containing DVR functionality as well as integrated Internet. In fact, this
week at NAB yet another player, AnytimeTV debuted a system similar to
WebTV, Sony and JVC with Internet delivered via KU-band satellite.
Currently AnytimeTV uses Microsoft Internet Explorer as their browser rather
than a customized WebTV-type browser. This will inevitably change with
consumer pressure for TV-centric browsers that can actually be seen and read
from across the room.
The True Impact of Time-Shifting on the Television Industry
What does all this mean to the TV industry? These boxes could make the trip
to the video store a thing of the past. Just last week, TiVo and ReplayTV
agreed to license a Macrovision proprietary chip that will add copy-protection
to programs recorded by their DVR set-top boxes. With this chip, any
protected program encoded by the DVRs in DVD, high quality digital format
cannot be permanently recorded or mass produced onto VHS player or
CD/DVD recorders.
TV Time-Shifted/Internet technology will usher in what Mason, CEO of North
Communications calls "the pivotal event; a transition of the passive TV into an
interactive transactional tool." (Advertising Age 3/29/99, Copyright 1999,
Crain Communications).
DVRs will fundamentally change the business of commercial television by letting
viewers control what they watch and when they watch it; potentially cutting ad
viewing nearly in half. Forrester Research feels this dramatic change is likely to
usher in a new era of pay TV as well as fully integrated internet as broadcast,
cable and satellite networks scramble to replace declining advertising revenues.
The Impact of Convergence on the Internet
It's crystal clear that the Internet is rapidly becoming a necessity rather than a
curiosity for email, shopping, research and news. Convergence is now more
than a buzzword heard at technology conferences, it has become a reality and
is about to challenge the very foundation of the television industry and
telecommunications in general. Indeed, over the next two years, convergence is
setting the stage for the internet to become a ubiquitous partner in our everyday
lives, found in our televisions, kitchens, cars, briefcases, pockets and handbags.
Content leaders within the Internet space are readying themselves for a move
away from the PC and onto a diverse array of platforms including TV. Yahoo
has just signed on with Online Anywhere, a company that automatically
conforms web content to non-PC on-line devices, and AOL has developed
their own "anywhere" approach. We expect Disney, Excite, ESPN, Sony and
many other dominant on-line content players to follow suit. They all have their
sites on time-shifted TV.
According to Media Matrix's "History of the Internet", home access of the
internet is up over 300% in the last three years with over 42 percent of US
adults logging on at home or at work every day. (Media Metrix, "History of
the Internet", Business Wire 04-08-99, 09 via NewsEdge Corp.). The
Media Matrix study also found that 44 percent of Internet users spend less time
watching television due to Internet use; a trend that has become a wake-up call
to the entire television industry. The issues associated with these trends are
particularly significant to consumer television manufacturers and programmers
who have previously been looking to broadband as the panacea that will
transform passive television into an interactive transactional tool.
The TPEG team anticipates a new cast of characters evolving around the
concept of transactional TV that will couple compelling programming with
internet rich depth of content and related impulse purchase opportunities.
TPEG is currently addressing the content/technology side of the equation which
fits within our core competency.
There will be a serious need for content that fits into this new technology
and marketing "space". We are exploring on-line content that naturally
expands the linear venue by creating a smooth but compelling transition
in and out of the passive television experience and into a fully interactive
experience.
The IAT-Report will continue to follow these developments and will provide
updates in successive reports. Links to on-line articles related to this subject
are posted on the IAT-Roundtable under the topic heading "Time-Shifted
Television".
The IAT-Report No. 2 - Convergence into wired and wireless appliances
and devices. A TPEG strategic Roadmap Into Internet Based Ventures -
the focus is on enabling technology with which the company hopes to
build long term equity strength and greater immediate shareholder value.
(May 17th).
Copyright 1999: The Producers Entertainment Group Ltd. (Nasdaq:
TPEG) (BSE: TPG)
G'Nite
Fred |
