April 2012 - almost up to date!

This archive of weekly comment pieces from the Cue Entertainment web site offers a personal perspective on the evolution of video home entertainment dating back to December 1, 2009. The author founded the first independent DVD authoring company in the UK (1996) and before that, worked on the development of CD-i, Fractal Video and Video Disc/Video Wall production (1986).

Current posts are behind a subscription pay wall and therefore this blog will always be at least three months out of date. If you want to know more, or better still, sign up for the regular newsletter, visit CueEntertainment.com

USER BEWARE before quoting any statistics or news items from this blog. We live in a rapidly changing world and a lot may have changed since the original appeared online.

Note: For copyright reasons, the images that were used to illustrate these posts are not included here. They can be found on the Cue Entertainment web site.

UltraViolet has a code in the news

April 27, 2012
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment 

The “first sale” doctrine in the United States allows anyone who buys a DVD to re-sell it but now studios worry that it applies to the codes that unlock the UV digital locker. 

Digital delivery allows consumers to download or stream entertainment content to almost any device from smartphone to connected TV when and where they want it. Today, the right to download a digital copy of a current feature film with unlimited access to three simultaneous streams is on open sale in the US for as little as $1.50 (£0.95) with few restrictions and no expiry date.

Although the studios are unhappy with the situation, it arises from the doctrine of “first sale” that is enshrined in US copyright law. Once sold to the first customer, the rights owner has no further claim on ownership of the physical media, which the buyer can retain, sell or give away without limitation. In a triple-play pack, for example, the consumer has the right to give away the digital copy, sell the DVD on eBay and retain the Blu-ray for home enjoyment.

The situation is not as clear with the UV redemption code, which comes on a printed card within the Blu-ray case. This group of numbers and letters is a key for one-time use, which unlocks access to one digital download file and unlimited streaming to registered devices. Once entered online, the code has no further value. If the user doesn’t want digital delivery, however, the card with the UV key could become a tangible asset and subject to the “first sale” doctrine. As such, US owners would have the right to sell it for whatever they can get.

There is no requirement for the buyer to prove ownership of the physical product; all that is needed is a valid access code. As first registrant, buyers have access to all the benefits of UV including streaming rights for up to six friends and family members and an HD digital download. For the equivalent of 95 pence, it is a bargain!

UV codes are available widely to unlock access to films such as WHE’s “Final Destination 5” ($1.50), “Happy Feet Two” ($3), Paramount’s “Adventures of Tintin” ($3) and New Line’s “Horrible Bosses” ($2).

On Apr.18, the Consumerist website run by Consumer Reports – the US equivalent of the UK’s Which magazine – told of a man named Stephen who bought Paramount’s “Mission: Impossible – Ghost Protocol” on Blu-ray and received with it a UV redemption code. As he had no use for the UV code – he was probably an iTunes user – he listed it on eBay. Within an hour or so, the online auction firm shut down his listing, on the grounds of copyright infringement.

Law firm Dow Lohnes Senior Advisor Jim Burger, an authority on intellectual property and former Apple Computer Senior Director, says that eBay was being “super cautious” in delisting Stephen’s offer. He tells Cue Entertainment that although the UltraViolet management is aware of the situation, there is no official view on whether or not “first sale” applies in this case: “Once you have registered, you certainly can’t resell parts of the service under the terms of the licence, but if the original buyer has not used the redemption code it might be difficult to prove copyright infringement.”

To go after an individual who offers an unwanted code on eBay is counterproductive, Burger says, although the firm has the right to remove any item that it suspects might infringe copyright. At the time of writing, bids on “Harry Potter and the Deathly Hallows Part 2” UV code had closed at $2 – a bargain for someone so long as the code genuinely was unused. The cost of Universal’s “Contraband” on the other hand, rose steadily through 13 bids to conclude at $12.99.

It is not, however, just teenagers who seek to make a few dollars by auctioning unused codes on eBay. Other players have entered the market. Based near Chicago, Family Video is the largest privately owned movie and videogame rentailer in the US –with more than 770 stores in 19 states – and Canada. The proliferation of double- and triple-play releases means the company may split the pack and sell the Blu-ray, rent the DVD and offer UV redemption codes online. Currently, 22 UV titles are listed on the Family Video website although not all are available immediately. For $13 (£8.02) the firm will email you the codes for seven UV titles. To receive the cards as proof of purchase, there is a shipping charge of $1.99 (£1.23).

According to the Family Video website there is a limit of three UltraViolet codes per customer per movie. Shipping fees will be charged automatically but will be refunded if an order contains only UltraViolet redemption codes. At three codes per movie, that means 18 friends and family plus three digital downloads and yet it still costs less than a single purchase of physical media.

The law in Europe and Australia is different, and Burger points out: “If the studios chose to take action to stop the sale of codes in the US, it would be necessary to enforce copyright on a state-by-state basis. It might be easier to enforce the terms of the licence outside the US, particularly in a country such as France with its ‘three strikes’ Hadopi legislation.”

This has not stopped the creation of a website, UltraVioletCodes.com, registered at the start of the year with a Dallas, Texas internet service provider. Despite its apparent US origin, the owner of the domain is in the Czech Republic and it appears that it will target the European market for UV codes.

The potential for consumer confusion and disenchantment is considerable since, unlike BD and DVD regions, UV codes are usually country-specific. Unlike the single market in the US, British citizens with homes in France and Spain have already found that they cannot access UV content overseas. It is far from certain that UV codes from central Europe will be valid in the UK and Ireland when the site is active.

The issue of UV codes brings into focus the sensible approach taken by Tesco and Blinkbox. Rather than ask consumers to register purchases online, with all the associated problems, they provide registration automatically at point of sale. The acquisition of both physical and digital copies is associated immediately with the purchaser’s Tesco Clubcard, and the formalities are in place usually by the time the customer returns home with the shopping. The access code and the Blu-ray title are bound together, which eliminates the possibility of unbundling and avoids the creation of a secondary market in digital files.

In the US, Walmart has taken the concept a step further. Customers may now go any of more than 3,500 Walmart stores and use their existing BD and DVD discs as a token of ownership in order to purchase digital streaming rights. DVDs qualify for standard definition (SD) video while Blu-ray discs gain access to high definition (HD) quality. Both are priced at $2 (£1.25). In a smart move, Walmart also will upgrade SD DVDs to the HD version for $5 (£3.10), which should encourage owners to convert more of their library.

Cloud video provider VUDU provides the technology for the Walmart venture, which is a partnership with SPHE, Paramount, Fox, Universal and Warner. To avoid the possibility that a single disc will make several trips to the store, each one is stamped with an invisible (and presumably un-erasable) code. There is no lengthy upload – the title references the master file held by VUDU, and customers retrieve their discs immediately after they are stamped. As with the Tesco/Blinkbox partnership, Walmart customers will have instant access to their content in the cloud when they return home.

In its April 16 announcement the company hedges its bets: “Walmart Entertainment supports UltraViolet, the movie industry’s initiative currently in its beta phase that allows consumers to put their purchased movies into a cloud-based digital library and keep track of them safely and securely. Walmart is able to offer customers the ability to watch and purchase UltraViolet-enabled titles directly from VUDU.”

It’s no surprise that both Tesco and Walmart have grasped one of the most basic tenets of retail: make it simple for customers to understand and do most of the work for them. For all its technical sophistication, UV continues to stumble from hurdle to hurdle, without clear direction at the top or public recognition at the base. To chase after individuals who try to sell unwanted redemption codes on eBay is not the way to win the PR battle.

To the surprise of many observers, it is the supermarkets and not the studios that are making the running in this particular race.

The art of smart discovery

May 4, 2012
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment 

Smart TV viewers are not as smart as they should be, says a survey published by research agency YouGov. Just 53% of owners understand that the internet connection is the defining component of the device. Without broadband, a smart TV might be a very good TV but it is not a connected TV, which is the whole point of a smart TV.

The YouGov survey claims that many smart TV customers are not seduced by the promise of “the internet on your TV” but seek merely to “future-proof” their purchase. Manufacturers know they must spoon-feed new owners with an automated routine that connects to the nearest wifi network almost as soon as they switch on. This assumes, however, that the proud buyers know the name of their home network and can remember the password.

Despite these uncertainties, YouGov Media Consulting Director Dan Brilot says there is a hard core of early adopters who know exactly what they want from a smart TV. He says that Sony is seen as the premium brand favoured by many early tech adopters but Samsung works the hardest to bring smart TV to the masses through its advertising campaigns. It also leads the way in the availability of apps on the sets.

Brilot says that linear TV is still at the core of things that most people watch, but the next generation, which knows how to search for content on the internet, will pay increased attention to Video On Demand services.

Although upcoming generations are adept at Bing, Google and other search engines, it also is evident that few venture beyond the first page of results. What Brilot calls the “new mode of serving and searching content” is not necessarily the way ahead for connected TV, since it tends to drill down to the lowest common denominator rather than to open up the joys of the entire film catalogue.

The number of “hits” on a particular search term influences heavily many of the mathematical formulas (algorithms) that search engines use. They are unlikely to suggest anything from deep catalogue unless one of the stars should die or otherwise make the headlines. Well-respected sites such as IMDb offer suggestions, along the lines of “People who liked this also liked…” but this tends to favour popular content over lesser-known gems.

That is why effective content discovery has become so important to broadcasters and connected-TV providers.

Music services, notably Spotify in Europe and Pandora in North America, provide a genre-based selection for users but a film alternative has yet to appear despite some excellent work by TVGenius (now RedDiscover) and Rovi. Too many online movie sites rely on DVD pack shots together with a bland content synopsis. This might be enlivened by voting systems – as with the Rotten Tomatoes site – or “like” buttons that alert your social networking friends to your tastes.

If you take the racks in an average branch of HMV, spread the titles across several hundred connected-TV screens and hand viewers a remote control, you do not have content discovery. After they browse multiple pages, each with eight titles, users soon conclude that there is “nothing worth watching” beyond the blockbuster titles.

The best “computerised curation” can work well for a limited catalogue but it will be a while before discovery engines approach the expertise of an informed human. Such systems have little personality and no whimsy.

An informed review, even in sound only, would be so much better than the current shop-fronts of Netflix, Lovefilm, Flixster, Blinkbox, MuzuTV and others on connected TV, which do little to generate business for their owners. Potential subscribers are expected to sign up with little or no evidence of the quality of streaming video that they can expect; only Lovefilm offers a short promotional video clip.

What is needed is a human approach, as quirky and unpredictable as John Peel’s 25,000-disc record shelf (launched this month), which sandwiches ABBA between Polish punk rock band Abaddon and Afrosynth group Abangani. The man himself is absent sadly but there is room for his present-day equivalent, albeit pre-recorded, who would top and tail each online film or TV selection with personal insights and unexpected recommendations. Where are the media studies graduates when you need them?

The need to be able to sort through and find content will grow ever more vital. The half-year Global Internet Phenomena report from broadband firm Sandvine predicts that the total amount of mobile network traffic in North America in 2012 will be around 1.4 Exabytes, of which audio and video streams will comprise more than 50%. An Exabyte is a very large amount of data indeed: the consumption of online entertainment content in 2012 will equal the amount of mobile data from all sources in 2011.

Even the best forecasters get things wrong and Sandvine acknowledges that it missed the mark in its previous prediction that real-time entertainment would make up 38.4% of mobile network traffic by the end of 2012. From data gathered between September 2011 and March 2012, the report concludes “…real-time (streamed) entertainment will cross the 60% threshold in late 2014 or early 2015 and will plateau around 70%.” By then, total mobile data traffic will be more than three times what it is today.

By any measure, that represents a large number of video clips but it is only a part of the story. When mobile users arrive home, they don’t leave their device by the door. Whether by smartphone or tablet, the domestic wifi network takes the strain in what Sandvine calls “roaming at home.” Mobiles account for 9% of all data sent over fixed broadband networks in the US and receive more than 15% of all real-time entertainment consumed. One in four YouTube videos delivered over fixed broadband networks is destined for a handheld wireless device.

Europe is not far behind in the consumption of real-time entertainment and accounts for 46% of peak traffic. Sandvine’s report says, “BBC’s iPlayer is the dominant long-content streaming service, accounting for 6.4% of peak period downstream traffic. Nevertheless, in the two months since launch, Netflix has risen to 2% of prime time downstream traffic, which is no small feat.”

This statistic should be set against the popularity of Netflix in the US where the service accounts for almost one third of peak downstream traffic on fixed networks. The report points out that competition is more entrenched in the UK and says that Amazon’s Lovefilm service and SkyGo offer “more local brand equity”.

For any online content service to succeed, the interface with users must be easy to set up, simple to use and accessible to all. The YouGov survey says that 47% of all smart TV owners connect to the internet at least once a week, most frequently in households with pre-school children. Although this bodes well for the future, it rather misses the point. A connected TV should be connected at all times. The transition between online and on-air should be seamless.

“There appears to be a strong consensus across the industry that the collision of broadcasting with broadband will define the next decade,” says a report from technology agency Red Bee Media (owner of RedDiscover). Titled “Tomorrow Calling”, it’s a report on the long-term evolution of broadcasting in the UK based on interviews with and contributions from senior industry figures.

As the digital switchover ends and digital services replace analogue UHF transmissions, the line between broadcasting and broadband will become ever more indistinct.

According to one contributor to the report, “In 2020, the notion that we’ll be able to point at something called the broadcasting industry with distinct revenue streams simply won’t hold. As the underlying platforms evolve, broadcasters are going to face competition for their traditional revenue streams and are going to diversify into new areas.”

Two-thirds of respondents said that digital distribution would replace physical media almost entirely by 2020. For that to happen, the CE industry has to commission a lot more usability testing among consumers. To play a Blu-ray disc is easy for everyone. To stream the same title to a connected TV assumes a familiarity with technology that just does not exist.

A qualified installer might commission the system – at a cost – but something as simple as power failure or loss of broadband connection can reset all the parameters to square one. It is a conundrum for TV makers, who would love to connect more smart TVs but are concerned about the technical literacy of viewers. 

For even if half of all owners understand the capabilities of their smart TV, the remainder find it hard to cope.

Tesco click needs more collect

April 20, 2012
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment 

Tesco has announced a third-party marketplace within the Tesco Direct web site. It’s a good idea but the implementation betrays all the signs of a rush job.

When Amazon founder and CEO Jeff Bezos penned his annual letter “to our shareowners” for 2011, he devoted most of the first half to comments from satisfied third-party sellers and Kindle self-publishers. He said that fulfilment by Amazon (FBA) had shipped tens of millions of items on behalf of sellers in the last quarter of 2011. Sellers could use Amazon’s global fulfilment centre network like a giant computer peripheral and when they used FBA, their items became eligible for Amazon Prime, for Super Saver Shipping, and for Amazon returns processing and customer service.

Amazon has ridden the wave of surfing and shopping to become the leviathan of the internet that it is today and carried with it a raft of third-party sellers who floated on its success. According to some estimates, the Amazon Marketplace accounts currently for up to 40% of the company’s online sales.

Tesco plc released its preliminary results for the full financial year on Wednesday and promised more localisation, more personalisation and more online selling in the year to come. Tesco CEO Philip Clarke announced a £150 million investment in internet operations, which will include opening the Tesco Direct marketplace to third-party sellers.

Both he and Tesco CFO Laurie McIlwee set out a clear and coherent strategy for the “bricks and mortar” element of the company’s global operation, which includes a move to smaller-format stores in many parts of the world. It also embraces an increase in the number of Tesco stores that are “dot-com” only, which pick and pack without the inconvenience of customers, and have proved successful despite teething troubles at Tesco’s Enfield dot.com centre that opened recently.

Clarke said, “We know what the issues are and we know how to fix them,” but he and his CFO were less sure-footed in respect to online operations. An examination of the revamped Tesco Direct website reveals all the hallmarks of rushed implementation, probably to meet the deadline of the financial year-end. Just one third-party seller was listed on Wednesday. By the end of the week, precisely three companies had signed up: online plants and garden specialist Crocus, electronics retailer Maplin and niche gizmo supplier, Purely Gadgets.

The Amazon model works well and it provides an example of how an online retail marketplace should operate. Research by cloud computing specialist Deepfield Networks shows that one third of all internet users access an Amazon Web Services (AWS) site on any given day. Bezos has taken the company from online bookseller to become an integral part of the web with reported net sales in 2011 of $48 billion (£29.9 billion) thanks to his instinct for the way etailing could and should work. In his wake, a host of “Amazon Associates” small and large have benefitted from the Amazon Marketplace.

“Without Amazon handling shipping and customer service, my wife and I would have to be running to the post office or someplace every day with dozens of packages. With that part taken care of for us, life is much simpler. This is a terrific programme and I love it,” says RJF Books & More owner Bob Frank, quoted by Bezos in the Amazon annual report for 2011.

“Invention comes in many forms and at many scales. The most radical and transformative of inventions are often those that empower others to unleash their creativity – to pursue their dreams. That’s a big part of what’s going on with Amazon Web Services, Fulfilment by Amazon, and Kindle Direct Publishing,” Bezos told shareowners.

At the Tesco analyst briefing on April 18, the company announced preliminary group sales of £72 billion – up 7.4% on the previous year. McIlwee told the gathering, “The orientation towards electrical was too high, which depresses the gross margin of that business. We have re-launched the Tesco Direct web site to make it far more functional and far easier to use from a mobile perspective. We finished 2011 with 38,000 SKUs and by Christmas of this year we will be up to 200,000 SKUs. Some of that will come from marketplace; a lot of it from our own ranges going online.”

This was not the clear vision of the future as expounded by Bezos, more a stock-keeping statement. McIlwee went on to acknowledge that the company has not exploited one of Tesco’s most valuable assets: the distribution network that already is in place. He said, “We deliver to 2,400 stores around the UK every day. That’s already a baked-in cost and we are going to leverage that system. It has surprised us how many customers want to pick up from their local store. At the moment, there are 770 Click & Collect stores and we will double that by Christmas. This gives us 80% coverage of the UK within a five-minute drive time and what we currently pay to a third-party operator will be leveraged off our own cost base.”

It is a cogent argument but although customers who buy from third-party suppliers will receive Clubcard points, the free Click & Collect service does not apply to products bought from sellers in the marketplace. This seems to exclude one of the primary advantages of being a seller on Tesco Direct. Why would anyone choose to shop through Tesco Direct when they can use the excellent website that Crocus offers? Crocus must see some potential for incremental sales but surely the benefits come from fulfilment by Tesco, as McIlwee himself pointed out.

In contrast, the Amazon marketplace offers sellers a simple choice. “Upload your product inventory – Customers buy your products: Amazon helps customers make quick, easy and worry-free purchases – Ship products to customers yourself or let Amazon fulfil for you – Get paid: Amazon deposits funds into your bank.” What could be easier? And Amazon marketplace customers in the UK earn Nectar points that can be spent immediately at the checkout in Sainsbury’s. You can’t do that with a Clubcard!

Tesco needs to take a much closer look at the operation of the Tesco Direct online service, the launch of which should have been delayed until more sellers had been persuaded to sign up.

Clarke said, “We have to increase our focus on the long-term strategic objective of ensuring that the business remains well-positioned for the opportunities and challenges of the internet. The pace of change has noticeably quickened in both food and non-food. That is why it is right to take a new approach to allocating capital, which fits the future. We must keep a clear focus on the strategic opportunity of the internet for a business with our scale, our reach and our capabilities. By 2020, every person under the age of 21 on the planet will have been born in the digital age. It is already changing the way that they shop.”

He pointed out that everyone in the room could use a smartphone to order and pay for non-food item now and collect it from a Tesco Express store after 3 p.m. the following day for no charge. “The challenge for everyone is making money in non-food online. Our online businesses grew sales last year to over £2.8 billion and increased their profits, despite a strong development-cost headwind,” he said.

The problem for Tesco is that you cannot dip just a toe in the water when you build an online marketplace. Clarke’s “phased introduction” must have a “big bang moment” to capture the attention of the audience. Amazon customers know they can take their pick from among thousands of vendors and still have the security and assurance of ordering from the Amazon web site.

Amazon gives sellers the option to supply direct or use the resources of FBA. If Tesco Direct marketplace is to succeed, management must promise more than an intent to “push forward with a clicks and bricks strategy”. Tesco’s online marketplace has to reach critical mass in order to be a success and to achieve this they must extend clicks and bricks to all marketplace vendors wanting to exploit the benefits.

McIlwee told analysts, “We don’t need to chase the future, we need to focus on what we have.” The £150 million he has earmarked for online development sounds like a lot of money but it must cover all Tesco ventures into the connected world. Investment this year would buy Tesco Direct the place it seeks. Timidity, fuelled by uncertainty, will allow competitors to fill the vacuum and lead to the long-term decline of the business.

Clarke and McIlwee should aim to attract and hold on to the widest possible range of marketplace vendors and take their lead from Jeff Bezos, a man who knows about these things. He said, “Even well-meaning gatekeepers slow innovation. 

When a platform is self-service, even the improbable ideas can get tried because there’s no expert gatekeeper ready to say ‘That will never work!’” 

The Japanese connection

April 13, 2012
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment 

To manufacture TV sets is a thankless task as the massive losses of Sony and Panasonic show, but rewards will be plentiful so long as they become well connected.

Not so long ago, two respected Japanese giants struggled for their right to an honoured place in the households of the world. They fought each other with bigger, brighter and better weapons and attracted millions of loyal supporters locked in combat oblivious to the changes that took place around them.

After many years had passed, they paused, looked around, and discovered that their battleground had shrunk, the crowds had moved away and the territory they had claimed as their own was no longer the same.

The consumer electronics giants Panasonic and Sony once offered some of the finest flatscreen TVs in the world and from the point of view of image quality, they still do. The days of power-hungry plasma screens and the once-mighty Trinitron, however, have gone and the era of the LCD flat-panel is already on the wane. The future lies with LED and OLED screens and they are manufactured elsewhere.

It is almost seven years since a quarter of a million coloured rubber balls bounced down the streets of San Francisco at the start of the Bravia LCD TV “Colour. Like no other” TV commercial. The perception of Sony as a source of TV with better colour pictures remains in public awareness and consumers still recall the strong brand message that advertising agency Fallon London presented with such confidence in November 2005. The problem is that Sony’s TV manufacturing division lost money that year and has done so in every year since.

While the two conglomerates concentrated on broadcast TV and 3D distracted them briefly, the CE companies beyond Japanese shores responded far more rapidly to the changed audio-visual landscape. With increased speed and confidence, the digital world is moving away from external devices such as the set-top box, games console or Blu-ray player and into the flat panel itself. The TV has become “smarter” and the fortunes of the major corporations in Osaka and Tokyo are under threat.

Most people knew that former Sony Computer Entertainment President Kazuo Hirai would face financial challenges when on April 1 he took over from departed Sony Corp. President and CEO Howard Stringer. But only Jeremiahs forecast the extent of the problem that would confront him. Now, the predicted loss of £4 billion in the past fiscal year means that Hirai has to take unpalatable action that will include the loss of 10,000 jobs or roughly 6% of the 168,000 work force.

In a presentation to market analysts, the new CEO hinted at the unthinkable for long-term Sony watchers: whereas most observers expected the company to launch a new line of OLED screens, Hirai said that the TV division is no longer a “core business” and unless its fortunes changed, it could be closed or sold off.

Meanwhile, in Osaka, two and a half hours from Sony’s Tokyo headquarters on the Nozomi high-speed train, Kazuhiro Tsuga is about to take over as the new boss at Panasonic. He also faces a massive loss, in his case £6 billion, and here again the TV division accounts for a significant chunk of the problem. Panasonic moved early into plasma screen TVs, which were introduced alongside DVD at the January 1997 Consumer Electronics Show in Las Vegas. Quality and longevity improved over the next decade and Panasonic has a justifiably high reputation at the top end of this market.

Although Panasonic pushed hard for the introduction of 3D with active shutter glasses the lack of significant market penetration of the format means that there is unlikely to be a return that will match its investment, at least in the near future. The company took its eye off the ball while it focused on stereoscopic TV with the result that it failed to spot the growing market for connected-TV. Only now does the company aim to launch a smart TV that will compete with the advanced products from across the Korea Strait.

Samsung and LG, the two leading South Korean manufacturers, moved swiftly to embrace the country’s high-speed broadband infrastructure and they have profited immensely. South Korea has a national average connection speed in excess of 16 Mbps, according to figures provided by Akamai. Support for multiple connected devices within the home is therefore a viable option unlike Japan where the average connection speed is about half that. There is not the same incentive to link connected TVs into the home network in Japan and even less so in the UK and the US, where the average speed at the moment is between 5-6 Mbps.

Wifi also plays its part. According to a new report from market research firm Strategy Analytics, South Korea has the highest wifi penetration in the world and slightly more than 80% of broadband households have their own wifi network. The country with the second highest percentage of household wifi networks in the world is the UK where 73.3% of British and Northern Ireland households run their own network. France and Germany both have more than 70% of homes on wifi while the US lags at 63%.

Switch on a smart TV South Korea and it will sniff out the home network and connect automatically – all it needs is the password. Perhaps that is why the smart TV range from Samsung has the look and feel of a device built from scratch to integrate with the world around it rather than just a collection of component parts bought in from outside suppliers. Slowly but surely, the connected-TV will arrive in UK homes if only by stealth as the next generation devices connect themselves to the world about them and to the internet.

Almost 40% of US households own at least one connected-TV, wireless or not, according to a recent report from research organisation LRG, although many of them are linked up through a connected games console. LRG founder Bruce Leichtman says that the number of homes that access the internet through connected devices has risen from 5% in 2010 to 13% today. It is a trend that is unlikely to level off although for the moment broadcast TV remains the main source of video content for most UK households.

Both Panasonic and Sony TV divisions will survive to fight another day although perhaps the battle will be less one fought between giant manufacturers and more one of innovation and smart ideas to match the smart TV. It is said that up to half of the Sony shortfall results from the closure of a chemical division making crystals for LCD screens rather than from a misreading of the market. If Sony and Panasonic can put their considerable talents together, they could yet return to fight another day.

And there is still a lot of mileage in those bouncing rubber balls. 

Our love affair with gadgets

March 30, 2012
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment 

“The Gadget Show Live”, scheduled for Apr. 10-14 in Birmingham, is a spin-off from Channel Five’s primetime TV technology programme. In 2011 (pictured), the event attracted more than 100,000 visitors: tickets for most days this year have sold out. Event Marketing Manager Sally Bent says that our passion for gadgetry is on the increase, “The standard of must-have technology is increasing all the time, as is the number of exciting products on offer.”

The origins of the word gadget are unclear although it might come from the French “gachette”, commonly used to mean the trigger of a gun. In the 19th century, British sailors used the term for any “mechanical contrivance” that helped them in their daily work and it is much the same today, albeit the modern contrivance is more often digital than mechanical.

The Birmingham NEC show will spotlight “The Top 20 gadgets that we can’t live without,” including the 55-inch OLED (organic light emitting diode) TV from LG, which made its debut at CES in Las Vegas at the start of the year. Samsung’s Galaxy S2 smartphone, chosen as Phone of the Year at the Mobile World Congress in Barcelona, also will be on display. The thinnest and lightest so far from the company, it offers such must-have phone features as voice control, face recognition and an 8-megapixel camera.

A survey carried out by exhibition organisers shows why it is wise to locate the event at the NEC. Research platform Explori.com polled 1,000 people on how much they spend on gadgets and responses show that people in the Midlands spend more than anywhere else in the UK with five of its cities in the Top 20 table followed by the London region and Wales.

According to the survey, Canterbury, Kent is Gadget City with an average of £1,916 per person handed over each year to acquire anything from a Sony SmartWatch to a B&W Mini Theatre system. The cities of Bath (£1,586) in second place and Stoke-on-Trent ((£1,480) also exhibit an above-average gadget habit as do the residents of Exeter (£1,326), Edinburgh (£1,253) and Liverpool (£1,201). The median annual UK spend on gadgets per person is £994.

In the 200 years that the word has been around, gadgets have become ubiquitous. As their use has grown, however, so has the assumption that gadgets offer only short-term solutions. A gadget does the job until a more permanent device comes along: one step above a toy but not something you would pass on to your grandchildren.

If it’s true that people spend around £1,000 a year on these devices,, thatcould be viewed as £1,000 less to spend on entertainment content. As homes, cars and phones become part of the connected “internet of things”, we are surrounded by many different gadgets that serve substantially the same purpose. It is in the interests of the video home entertainment industry to intercept a proportion of the spend on shiny new gadgets and direct it towards the acquisition of content whether streamed over the cloud or moulded into plastic. The latest iPad screen is unlikely to bettered for some years to come: it should be filled with video entertainment.

In an informed commentary published in March, market research company Parks Associates Director Tom Kerber says “All devices will eventually be connected to the internet. Each hardware object in the real world will have an accompanying virtual object in the cloud, which represents the current state of the end device and retains its operational history.”

He reports that the much-heralded “smart refrigerator” is now available from at least two Korean manufacturers. “Samsung includes an LCD touch screen on its connected refrigerator that allows family members to leave a note, check the weather, pull up recipes, and even listen to music,” says Kerber. It is but a short step to add video from the cloud, perhaps SPHE’s “Julie and Julia”, streamed from Lovefilm and watched while reheating the frozen food.

Bill Gates (and others) said that we overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10. The dramatic leap forward represented by the iPhone or iPad does not happen every year and between these highlights there is the incremental improvement that allows Apple to continue to sell last year’s iPad model at a slightly lower price. Consolidation and interconnection are the most likely drivers over the next two years rather than market-changing innovation.

At the time that mobile phones first became commonplace, many people also carried pocket calculators, portable music players, pocket cameras and other handy gadgets. None of them were interconnected. All of this functionality and more now resides on a small wafer of silicon connected to a touch screen of increased size and sophistication. As Kerber points out, the latest gadgets use the cloud to achieve interoperability while once-incompatible entertainment devices link to each other through DLNA.

Turn on the latest generation of Smart TVs and Blu-ray Disc players from Samsung and the only thing the consumer needs to know is the password to the WiFi network. Once entered, it is informative to watch the devices talk to each other as they locate the smartphones, computers and energy monitors that are part of the Home Area Network (HAN), regardless of the brand of the gadgets. Within a short space of time, BD Live is enabled, apps appear and viewers can access all the shared entertainment content within the home.

Online services from Lovefilm, Netflix, BBC iPlayer and others appear alongside broadcast digital radio and TV services, weather forecasts and travel news. There is no longer a need for a dedicated gadget in every room: as long as there is sufficient shared bandwidth, everyone in the household is now part of the connected home.

Kerber divides the advent of converged technologies into three groups. The first, which includes wireless networking and reliable broadband connectivity, is already here. The second is to open up of the market to new products and services once market incumbents (primarily the telecom operators) switch to open standards as the result of regulatory or competitive pressures. A third group, still in embryo, enables the implementation of “personal assistant” devices that learn from their environment and adjust their behaviour accordingly.

Kerber says, “In Japan, there are billboards that change the messages being displayed, based on automatic content recognition. Real-time video classifies the passers-by and the advertising changes to match the demographic.”

The smartphones that we know today might appear quite dumb 10 years from now but when they push all the heavy-duty processing up into the cloud they can appear smart without much modification as long as the screens and the batteries last. Tasks such as translation of the spoken word might be beyond the current generation of hand-held devices but as Google Executive Chairman Eric Schmidt has demonstrated on several occasions, the power of the processor in the gadget is less important than the power available in the cloud.

“The Apprentice” returned to BBC1 this month and Alan Sugar’s task for the teams in Week 2 was to create a household gadget that we could not live without and then market their invention to two sceptical retailers, home ware specialist Lakeland and Amazon, the online vendor of every imaginable gadget.

As inventor of that epitome of the dedicated digital gadget, the e-m@iler telephone and keyboard combination, Sugar was well qualified to judge the commercial potential of the gadgets devised by his budding apprentices. Neither the bath-time plastic splash screen nor the tabletop composter impressed the potential investor.

Amazon buyers declined the opportunity to obtain the best price on offer by placing an order for one million units of the plastic splash screen at £9.01 each. 

Perhaps the hopefuls should first have done a little market research down in Kent among the shoppers in Gadget City.

TV and the net: the game is up

March 25, 2012
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment 

MTV calls its young viewers “millennials” and it says they know what they want and that is a mash-up of TV, the internet and games, and they want it now. The internet and television have joined forces finally and irrevocably, and it knows what it wants to be when it grows up.

The annual event that started eight years ago as IPTV World, flirted with Digital Home and courted the enemy for the past two years in the guise of IP&TV World Forum, has decided what it wants to be when it grows up.

From next year, broadcasters, telecoms, service providers and consumer electronics companies will make their way to Olympia in London for what will thereafter be called: TV Connect.

The IP&TV World Forum 2012, held in mid-March, embraced Olympia 2 in addition to the main hall at the London venue to accommodate an unlikely collection of creative, technical and engineering exhibitors and delegates and a comprehensive conference agenda.

More than ever before, speakers at the event discussed the content that will fill connected screens in the years to come, none more so than the keynote speaker did on Day 1: MTV and VH1 Digital General Manager, Kristen Frank (pictured). She said: “No amount of technology will make a bad story good but it can help to make a good story great.”

For supporters of traditional linear entertainment, her presentation was unsettling. She pointed out that there is a cohort of “millennials” in the US today – more than 100 million young people born in the 1980s and ’90s – who are eager for a change in the linear entertainment landscape.

“They are very different to any generation we have seen before at MTV and if they are not your No. 1 demographic today, they will be soon. It is invaluable to know what motivates them,” Frank said as she introduced research data compiled by the company.

She noted that 10,000 young people turn 21 every day in the US and predicted the “gamification of everything” and its importance in the future of content creation. As they enter adulthood, “the average millennial will have spent more than 10,000 hours gaming, the equivalent of going to school every day for seven straight years, and that makes them experts,” she said.

In her view, game-like dynamics are important: it is not just a matter of putting gaming into content: “That will drive emerging products and the content that will be important to this generation. Millennials raised in an on-demand, push-button real-time world want it their way: 24/7, always on and now! They use this absolute choice to customise products and experiences to suit and reflect their individuality.”

Frank did not just preach the merits of change; she also laid out MTV’s plans for what she calls, “The power of story-telling without borders.” It will be a game-like interactive experience that allows fans to “friend” and interact with characters in real time. A “choose your own” adventure mystery, the format will run parallel to the action on the TV screen but will link to the show. She said: “The way in which fans interact with the characters they love will directly affect their personal story. There will be a unique story for each user, played out in secret videos, text messages from characters to the fans’ phones and status updates that will help them solve the mystery.”

She spiced her presentation with comments from millennials, whom she described as the authentic voices of MTV’s target audience. 

“It would be awesome if I was watching a movie and could decide which way I wanted the story to go,” said one. “I wouldn’t post something online if no-one is going to read it. Why would I watch something that is not watching me?” asked another.

Franks summed up by saying that it is critical for the content creation industry to listen to this potential audience and embrace the changes proposed. While content will always be king, the ways in which audiences consume and interact with content change constantly as we enter an era in which the traditional walls come down and creators can drive the narrative across all screens.

“From the advent of radio, movies and television content, inspiration always follows technical innovation. Social media is no different. Social innovation has already helped us to tell better stories and, for us, it really is ‘all about story-telling’,” said Frank.

Industry analysts Point Topic released a report prepared by the industry organisation Broadband Forum to coincide with the IP&TV World event. It marks the moment in Q4 2011 when Chinese subscribers (12.52 million) toppled France (12.16 million) from pole position in the table of countries with the most IPTV connections. Europe retained the top regional spot, where French subscribers outnumbered sixth-place Germany (1.97 million) by almost 6:1. Belgium is next, with approximately 1.25 million IPTV connections and the Netherlands took 10th place with just under 1 million viewers. Russian IPTV connections more than doubled during 2011, from 495,000 to 1.15 million to place the country eighth in the global league.

The potential audience for connected TV continues to grow as the number of broadband subscribers ended 2011 at a shade under the 600 million mark, an annual growth rate of 12.3%. In the European region, the total number of lines at the end of Q4 stood at more than 177 million as Germany added 1.8 million new lines to retain its place as the most connected country in Europe, with 28.5 million lines. France followed in fifth place (22.8 million) and the UK was in seventh place with 20.7 million subscribers, an annual growth rate of 5.8%. Inevitably, China topped the table, with 158.2 million of its citizens online, 20.4% up on the previous 12-month period.

Broadband Forum CEO Robin Mersh said, “This is an exciting return to higher growth figures and points to a strengthening in the broadband market … we are seeing broadband move into the daily lives of more and more people the world over.”

Of the many companies to exhibit at the event, the quality assurance experts at Agama Technologies represent the epitome of an industry that has found its place finally in the world. IPTV delivers its entertainment content over a closely monitored circuit with a guaranteed quality of service, which is why companies such as France Telecom and BT Vision majored on dedicated connections.

Over-the-Top (OTT) video, as delivered from Lovefilm, Netflix, Spotify, iTunes and others, has been variable at best but as bandwidth and broadband speed has increased, so has the viability of OTT delivery. Agama Technologies Product Management Director Johan Gorsjo says: “Service quality will be crucial for securing revenue streams, maintaining a satisfied customer base and enforcing service-level agreements. 

OTT technology represents a tremendous opportunity for operators to reach customers and support new ways of consuming media, such as ‘TV Everywhere’. At the same time it is more complex, with new requirements and challenges to ensure the customer experience.”

At this year’s event, OTT technology moved into the mainstream. It coincided with the realisation by content creation and delivery companies that there is at last a financially viable application for all that buried glass and copper.

One of Kristin Frank’s millennial voices sums up the rising demand from the new generation for interactive content: “If you look at every industry, you can see how it has been completely disrupted by the internet. It needs to be something that is in-line with the online generation. 

The question is: if TV were created now, and the internet already existed, what could we do?”