While Bill Gates was touring the world like a rock star promoting the release of his company’s most recent operating system earlier this year, his soundbites concerning television’s future grabbed headlines. The chairman and co-founder of Microsoft predicted, during a panel at January’s Economic Forum held in Davos, Switzerland, that the TV as we know it today will be a different breed halfway through the next decade. Before he jetted off to Bucharest, London, Edinburgh, and Paris to extol the virtues of his company’s new operating system, Vista, Gates described a future that had computers and televisions morphing into one device, with more interactive content characteristic of the Internet pumping up the passivity of television programming. Viewers would finally be able to focus on only the content they deemed interesting, and banish all the other superfluous junk.
We have heard this prediction before.
We’ve seen big-name tech companies invest in Internet TV. We’ve attended the Consumer Electronics shows, especially in the mid-1990s, that swore this was finally the year for the marriage of Internet content, TV programming, and usability. We were introduced to WebTV, then MSNTV, and most recently have read about the promises and deployments of IPTV. So now all that remains to be seen is which company, which service provider, which programming genius will make it easy and affordable for the average consumer to benefit from it. Oh yeah, and do consumers really want it?
To be sure, the two devices, normally living in two disparate parts of the home, have won and lost their share of users. In January, Reuters reported the number of hours spent by young folks plopped in front of a TV is shrinking, thanks to the surge in high-speed Internet coupled with the crazily popular social networking sites, like YouTube and MySpace. Meanwhile, it seems that consumers are more interested in scoring deals at their local consumer electronics store on the flashy big-screen TVs than on splurging for a new PC. The home computer market in the U.S. experienced flat growth during the third quarter last year after healthy increases in previous quarters, according to research firm IDC.
Casting the Net
Whether or not consumers clamor for it now, companies know there is a lot at stake for the winning formula that can attract the user, and there are a lot of approaches flooding the market. Consumer electronics giant Sony, for instance, is offering its Bravia Internet TV Link, a device that connects to the company’s HDTV and also to the service provider via an Ethernet connection. With this device, rumored to cost nearly $300, customers can view only select Internet material, in this case from content companies Sony has partnered with, like Yahoo and AOL, Grouper, an online video and platform company Sony forked over $65 million for, and, of course, the library of Sony Pictures and videos from Sony Music. Grouper, which boasts user-generated videos, gives Sony a point of entry to the social networking market and a potential for revenues, say experts. Using Bravia, all this Net content can be viewed from the couch, much like another channel on the TV.
"We are shifting content experience from a lean-forward PC exercise to the comfort of the big screen TV in your living room," stated Randy Waynick, senior vice president of the Home Products Division at Sony Electronics. "Internet video will clearly be the next step in the evolution of high-definition television, giving users more control over the content they view."
Apple, riding high on its iPod success, rolled out Apple TV, also in the $300 range. Users pay to download videos and music from iTunes or Disney or Paramount, with whom the company has deals, onto their computer. Then via a wireless connection, the content is sent from the computer to their television where the content can be viewed.
And then there’s Xbox 360, the popular gaming console, that when connected to the Internet enables users to view downloads of select Internet content. During his keynote address at the Consumer Electronics Show in January, Gates unveiled an IPTV system on the Xbox 360. A service, offered up by "providers that are deploying TV services over broadband networks based on IPTV Edition software," will be available to customers by the end of this year, the company says.
The fight for consumers and the perceived shift in how we will view content in the future hasn’t been lost on the more innovative media companies. For instance, after Sling Media threw its hat into the Internet device ring with its SlingBox product, which enables a user to view traditional television content from a slew of different devices, including the PC and mobile phone, or send content wirelessly from the Web onto their living room television set, others took notice. The company’s strategy caught the attention of tech behemoths Liberty Media Corp. and Echostar Communications. Both companies invested in Sling.
I Want My IPTV
The research firms are getting bullish on IPTV. Subscriber rolls could increase to 36.8 million by 2009 from 4.3 million in 2005, according to Multimedia Research Group’s IPTV Global Forecast. And system revenue is even rosier: from $740 million to $4.3 billion in the period 20052009. During the IPTV World Forum, held this past March, it was reported that several early IPTV deployments are catching on. Spain’s Telefonica launched Imagenio, a television service in November 2004 and now counts more than 200,000 subscribers, the forum says. And France Telecom, often held up as a model for successful IPTV service, also counts 200,000 users for its own TV service, marketed as MaLigne. In the U.S., AT&T pledged support of its IPTV service, dubbed U-Verse.
"We are committed to IPTV and a fiber-to-the-node network," Ed Whitacre, AT&T CEO, said during a fourth-quarter earnings call. "It’s the right architecture for the long-term. We see it in the field, it works, and it delivers a great service for consumers." AT&T is projecting to make the service available to eight million customers by the end of this year.
IPTV is defined by Wikipedia as a system where digital television service is delivered using the Internet protocol over a network infrastructure, which could include a broadband connection. Service providers and analysts are calling it the triple play, bundling offerings like video on demand plus voice over IP. And Microsoft has a vested interest in its success. That alone makes a strong argument for the all-but-guaranteed success of IPTV.
But questions and challenges remain. How do consumers want to use the information and devices? Many of you reading this column probably already have a wireless network in your home. You’ve got the DVD player and the high-definition TV. You’re likely to have a DVR or use a TiVO for time-shifting your television viewing. You subscribe to a high-speed Internet connection for your multiple computers. Your grip is often vice-tight around your Blackberry, Treo, or other mobile device. You might even use Netflix to get your movies (or be willing to go to Wal-Mart, which recently announced an online movie download service). So why would you want to go through the hassles of configuring your television to scoop up limited Internet content for viewing?
Some analysts, think the answer is "no."
"There’s very limited use cases for wholesale melding of the PC and the TV experience," says Todd Chanko, analyst at Jupiter Research.
Consumers want to watch movies and TV shows on their television, not on the computer. That last piece of insight is from a study by Jupiter Media, which says there was a slight decline in the percentage of Net surfers who downloaded video programming from 12% in 2000 to 11.6% in 2004. Consider the large number of boxed sets of DVD movies and television series collections lining the shelves at discount stores, and that figure makes sense. Why would a user want to pay to download an episode from a TV show? Perhaps to view it later on a mobile device, speculates Chanko, but not likely to view it on a computer.
"There is no strong consumer demand," Chanko says. "There’s a difference between consumers taking advantage of broadband access and streaming content and the outright conflation of these two distinct platforms."
Challenges of network infrastructure and interoperability await the pioneers in this space, say experts. The existing digital cable system is well equipped to handle TV, says Peter Christy, principal at the Internet Research Group, a Los Altos, CA-based research firm.
"I don’t understand why we need a new TV system, so in many ways the existing cable infrastructure is the right answer, and it gives you both TV and other data applications (such as telephony and browsing) on a single system," he says. "One that exists now."
While shoving television content over the Internet might seem like a solution for Internet-based service providers, like AT&T and Verizon, the task will be arduous, one that will require a "massive recapitalization" after which they’ll have something no better than what the cable operators already own, Christy adds.
Inevitable, too, is yet another issue that will arise when all these different companies, device makers, and software platforms take over my home office and living room: interoperability problems and help line struggles.
I can see it now. Five years down the road. My computer and television have merged. The 50-inch high-definition TV screen that occupies one-third of my family room has allowed me to gather up personal profiles on all the American Idol contestants and analyzed every line from The Daily Show with Jon Stewart. I’m just getting comfortable, when in clear color and surround sound it happens: an error message appears on the screen with its characteristic audible ding.
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