May 17, 2010 and counting

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

Prior posts take us from December 1, 2009 to May 17, 2010 and form an archive of weekly comment pieces that were first published on the Cue Entertainment web site. Current posts are behind a paywall and this blog will always be at least three months out of date.

USER BEWARE before quoting any statistics or news items - we live in a rapidly changing world!

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.

3D Health risks

MAY 17, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

For Christos Glaridis at Blu-ray authoring company Eyeframe in London, Thursday was just another day at the studio with several conventional DVD and BD titles in production, a bunch of 3D discs for Sky, destined for the electrical superstores around the UK that already have 3D-ready screens, and several projects under wraps until later this year when we all are expected go 3D mad. Then there’s a text on his phone. “This is crazy,” he says, “A company we’ve never worked with before wants a 3D film trailer transferred to Blu-ray for a screening at the Cannes Festival on Friday!”

The British public has long championed John Logie Baird as a pioneer of television even though nothing of his own invention found its way into the TV system we use today. The popular press, on the other hand, has spent the past 75 years warning us of the dangers that arise from spending long hours in front of a TV screen at times when we could all be reading a newspaper.

Seeing some of the scare stories about 3D TV, even before a regular service has begun, it is easy to imagine we are back in the last century, wondering what 30-line TV might bring and whether or not Baird, a man previously best known for his “chemical socks”, really could make it possible to see things happening many miles away?

In “Here’s Looking At You”, a look at British TV before 1939, Bruce Norman records the laughable misunderstandings that appeared in print as self-publicist Baird announced his developments in mechanical TV.

The Daily Mail, always at the forefront when it comes to welcoming change, wrote in a 1926 editorial of the need for careful regulation of “Noctovision”, a Baird invention that used “invisible rays” to illuminate its subject at night. “Nervous maiden ladies… can no longer rely on being able to go to bed in the dark,” the paper warned.

In 1935, when the BBC shut down the original Baird system transmissions in preparation for the trials of “high definition television”, the Daily Express raised concerns about the dangers to the public that an electronic TV service might present. “Can television see into your home?” the paper asked. “Will television sterilise the population?”

Fortunately for the present generation this didn’t happen, although The Daily Telegraph got closer to the truth when it wrote “The television receiver is not in the least dangerous once the elementary fact is grasped that it must not be tampered with internally.”

TV was not completely free of danger; early cathode ray tubes had a habit of imploding, at which point the internal parts were fired at high speed through the screen. One such event is reported to have killed a visitor to the Berlin broadcasting show, shortly after Adolf Hitler had stopped to admire German television programmes.

Aside from the tendency to obesity that is experienced by some “couch potatoes”, the rumours that TV is bad for your health have proved unfounded – so far. The imminent arrival of stereoscopic TV has given rise to a wave of news items promising headaches, eye-strain and worse for those unwise enough to spend several thousand pounds on a 3D HD TV.

The experiments with 3D films in the 1950s and 1960s did nothing to advance the cause of stereoscopic entertainment. Apart from the fact that they almost irrevocably linked red/green glasses with 3D in the mind of the cinema-going public, the weaving motion of two film prints as they ran through separate projectors helped to produce the “headaches” and “nausea” that are still referred to today.

Now, fast-forward to the second decade of this century and the headaches come from other quarters. In February, the Italian police raided cinemas throughout the country and confiscated 7,000 pairs of Chinese-made 3D glasses said to be a health risk for wearers. Although the grounds for seizure were later reported as a lack of proper CE labelling, a statement from the Italian Ministry of Health claimed that the cinemas were not carrying out “cleaning and disinfection to prevent the glasses from becoming a vehicle for eye and skin infections and infestations of the head.”

Audiences for 3D films don’t seem to have been bugged by the police action, since “Avatar” did as well at the Italian box office as elsewhere. If the European public should abandon the cinema in order to watch 3D TV at home later this year, yet more terrors could lie in store, as health and safety worriers go mad.

In April, the CE giant Samsung issued an ominous message to potential customers for its 3D TVs. “Viewing in 3D may cause disorientation for some viewers,” read a posting on the company’s web site, “Accordingly, do not place your television near open stairwells, cables, balconies, or other objects that can be tripped over, run into, knocked down, broken or fallen over.” Actually, that sounds like good advice for conventional TV receivers as well.

Samsung went on to warn the elderly, children, the sleep-deprived and the hung-over of “Confusion, nausea, convulsions, altered vision, light-headedness, dizziness, and involuntary movements such as eye or muscle twitching and cramps.” Of course, these side effects could arise equally from over-indulgence while watching the big match in 3D at the local pub.

Pregnant women were singled out as likely to fall over after watching 3D programmes and people with epilepsy were told that the left/right flashing of active 3D glasses might trigger an attack. It all sounds very worrying for those nervous maiden ladies who are planning to be first in the queue at Currys when a 3D TV service is launched.

With so many rumours and false starts, it is not surprising that public confusion about 3D abounds. Red/green “anaglyph” movies on DVD with giveaway glasses inside the case did nothing to advance the format. A post on one popular website claimed he would never buy a 3D TV because, “The 3D glasses hurt my eyes and also the movies are always tinted and that is lame, because I love seeing vibrant colour”.

Public demonstrations, such as those from the Panasonic roadshow earlier this year and Sony’s plans for the World Cup, together with the substantial investment that Sky is making to bring stereoscopic TV to the home, will go some way to popularise the format.

The 3D content that will soon air is the culmination of several months of trial and error. Content owners, post-production and authoring houses climb the learning curve every day and they will sometimes slip back. Not everything in 3D will be perfect at the start and some things – where to put subtitles, for example – have yet to be defined. Overall, however, 3D TV is already much better than it was a year ago.

Many of those involved in preparing content for release in Q4 2010 believe that the best of this year’s output will survive until the ultimate vision – moving holographic images without glasses – pops up from our mobile communicator sometime around 2020.

Some years after his ideas were abandoned, John Logie Baird wrote of his experiences, “Oh why didn’t I cash in while the going was good?” Will enthusiasts for what has been called the “cardboard cut-out 3D” of today think along the same lines a few years from now?

And what of the twelve-hour turn-round for that 3D trailer that was optimistically requested from Eyeframe? “The Blu-ray disc was on the first flight out to the South of France the following morning,” said Christos Glaridis.

The technology may be new but, 3D or not, customer service takes priority.

Hung Parliaments

MAY 9, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

Given the contribution that the creative industries make to our national wealth, plans to maintain the UK as a centre of excellence in creative innovation might expect to be high on the agenda of the three largest parties. Yet of the 75,000 words contained in the Conservative, Labour and Lib-Dem manifestos, barely 1,000 are devoted to the digital economy. If the sector’s voice is to be heard above the background noise from other lobby groups in the months to come, it must press its case loudly and clearly, whatever the composition of the next government.

Most politicians acknowledge the UK’s outstanding record in film and TV production, video game design and digital media innovation but their grasp of what is needed to deal with piracy, how high-speed broadband should be funded and the provision of adequate educational resources for the next generation of digital media professionals is fuzzy at best.

Companies in the creative sector employ nearly 2 million people and generate 10% of the UK’s GDP, which makes the lack of detail in all three manifestos remarkable. Even though the fruits of online digital technology are happily accepted by consumers, the parties appear to have concluded that there are few votes to be had in new media.

The 25,000-word Conservative document, for example, identifies 600,000 additional jobs and £18 billion of additional revenues that would result from having the right broadband infrastructure in place. If implemented, this would make a significant contribution to resolving the country’s economic woes. Surprisingly, the Tories provide no further detail on how they plan to deliver a connected Britain.

In the following paragraph, alongside a commitment to scrap the 50p “phone tax”, the manifesto continues, “If necessary, we will consider using the part of the licence fee that is supporting the digital switchover to fund broadband in areas that the market alone will not reach.” And, that is all.

Just these two paragraphs, totalling 105 words, is the sum of the commitment from the UK’s largest single party to bring digital technology to the workplace and the home. Not a word on piracy and no encouragement for creative industries or for businesses in rural areas. Very little either about the source of the funding needed to enable the UK broadband infrastructure to match that available elsewhere in the world.

Turning to the smallest of the three parties, the Liberal Democrats are also reluctant to discuss how high-speed internet and associated technologies could be developed to benefit the economy. The subject comes up just once in the 20,000 words of their manifesto, when they claim they would: “Support public investment in the roll-out of superfast broadband, targeted first at those areas which are least likely to be provided for by the market.” Again, no indication of when or how this funding would become available, nor how the market could be induced to step in and finance those areas not publicly funded.

In fact, the 25 words reproduced above are the only reference to broadband in the entire document. Elsewhere they say that, “The creative industries are one of the fastest growing sectors of the economy,” without any evidence that they understand the importance of sustaining that growth, though they do say they have plans for a “Creative Enterprise Fund offering training, mentoring and small grants or loans to help creative businesses get off the ground.” The word digital doesn’t appear once in the Liberal Democrat document.

Based on their pre-election promises, a coalition manifesto from these two parties would contain barely enough words on our digital and creative industries to fill a postcard, even though 10% of the national income is derived from these sources.

So does the previous ruling party do any better? The 76-page Labour Party manifesto devotes nearly three times the combined space of the other two parties to the subject of broadband Britain. In around 600 words the party provides a strangely familiar summary of its plans.

This is perhaps not surprising, since the rushed passage through the House of Commons of the Digital Economy Act was one of the last tasks of the old régime. Labour probably feels that the digital genie is back in the bottle for the moment and its manifesto reads like a commitment to do more of the same. There is a promise to deliver a universal broadband service of “At least two Megabytes per second” by 2012. The writer obviously had difficulty telling bits from bytes, since the data rate equates to 16 Megabits per second (Mbps), which is eight times faster than the 2 Mbps average that most people receive today. Technology can be so confusing!

State funding of £1 billion would encourage private operators to bring superfast broadband to 90% of the population, the Labour manifesto claims. This generous offer, spread over seven years, equates to an annual spend of about £145 million, a sum of money that is insufficient to dent the digital divide that separates the UK from continental Europe. Even with this minimal commitment, finding the public-sector funding in a depression could be problematic.

The Conservative manifesto acknowledges the major contribution that the creative sector makes to the British economy. The financial benefits that would arise from investment in infrastructure are common ground in the policies of all three parties. There is, however, no sense of urgency in any of the documents, whether confronting piracy, eliminating broadband “not-spots” or encouraging the creative industries as wealth generators.

Whether the country is to be governed by a single party or a coalition of any two out of three, the clamour for lower taxes, better schools, action on globalisation and many other policies deemed “vote winners” could overshadow policies on digital media. It is not enough for our rulers to assume that recent legislation will allow decisions on this key sector to be postponed. Industry leaders and organisations representing companies in the digital economy need to start lobbying now to ensure that politicians implement the sparse policies already in their manifestos and articulate new and better ways of delivering their broadband promises.

Perhaps even more important than convincing the politicians, however, is the need to involve the public in the debate on how our digital infrastructure is to be built and paid for. If the average voter doesn’t care about issues like the universal broadband commitment, it is unlikely that their elected representative will do so either.

Paying for Downloads

MAY 4, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

Consumers still adore Lovefilm, despite the squeeze on spending power, and physical media sales performed well in Q1, with Blu-ray continuing to shine. There are challenges on the horizon, however, including the expansion of kiosk rentals, ever-improving digital delivery and a plan to legalise pirated content.

On Friday, Coinstar, the parent company of Redbox, the dollar-a-night US kiosk operation, announced that profits had more than tripled in the first quarter. Nearly 40 million DVD and Blu-ray titles are taken home each week by American consumers and almost a quarter of these are dispensed from Redbox kiosks. Each unit delivers an average of 400 discs a week and takes $2.16 per rental, an increase of 7% over last year.

Having escaped from the clutches of near-bankruptcy, Blockbuster plans to expand its kiosk roster from 7,000 to 10,000 outlets this year, at the same time exploiting the four-week window advantage over competitors that it has negotiated with Universal Studios. A deal signed with CE manufacturer Samsung means that the range of Blockbuster on-demand devices will also grow over the year.

Netflix prefers what it describes as a “hybrid solution”, which combines online selection, media-by-mail and digital delivery. It’s a package that attracted nearly 14 million subscribers and generated almost $500 million in revenue from subscriptions in Q1 this year. Significantly, 55% of those subscribers streamed at least one film or television episode over the period and Netflix is aiming to have its service on more than 100 CE devices by the end of the year. This week the company advertised for a Director of Product Management with responsibility for driving international affairs; Netflix could well be coming this way.

Since the early days when VHS cassettes were unofficially rented from the corner shop, video rental has been a convenient option when “there’s nothing on TV”. Currently, rental in one form or another appears to be back in fashion but clouds remain on the horizon unless the landscape suddenly changes.

For the studios and for several retailers too, the problem with rental is that it is perceived as reducing the market for sell through packaged media. The view among content owners has always been that they want a different way to share the rental cake. They might be careful what they wish for — any equitable method of sharing reward should also share risk and distributors have long been averse to sharing the downsides of the rental business. Meanwhile, online delivery and piracy continues to threaten revenues, whatever they decide.

The news this week that News Corp. has made a significant investment in a US-based music industry start-up could be the dawn of a completely different way to price content, one that could have a profound affect on the value of digital media from whatever source. It might also provide a dramatic boost to rental of high-quality physical media and increase compensation for content owners, although it would have a negative impact on retail sales.

The newcomer is offering to pay a royalty on every audio track, based entirely on the number of plays each month and regardless of whether it was legitimately purchased, illegally downloaded or ripped from a CD. Even bootlegs are included, in what at first sounds like a remarkably philanthropic attempt by Rupert Murdoch to give away his money to the music industry.

Using its proprietary content identification technology, the company, Beyond Oblivion, creates DRM protected versions of all music files on a user’s system and logs each play from then on. No matter that there may be thousands of previously illegal tracks, the rights are cleared with the content owner and the user is licensed to play the music without infringing copyright.

“The entire history of recorded music has already been ripped, shared and downloaded,” says Beyond Oblivion’s British CEO Adam Kidron, “we are never going to get those files back. There is no illegal music in the Beyond world because we pay royalties no matter what its source.”

Just 5% of consumers pay for their music, according to figures from the International Federation of the Phonographic Industry (IFPI) and Kidron claims that these few are subsidising the many, while at the same time reducing the demand for both devices and services.

He describes existing music industry revenues as “appallingly small” and explains that it is much better for the labels to receive a small royalty each time a track is played rather than try to recoup their losses by overcharging a minority. Kidron believes that the royalties paid by his company could ultimately quadruple last year’s global digital music take of $3.7 billion.

The model is outwardly similar to Nokia’s “Comes with music”, which is an all-you-can-eat subscription service that promises unlimited free downloads for a fixed period. The difference is that device manufacturers and internet service providers pick up the tab through a licence fee payable to Beyond Oblivion, a cost that is then included in the purchase price of the hardware or the broadband subscription. In return, users get “life of the device” access to content, wherever they find it.

Involving the CE hardware manufacturers in the operation — Sony and Philips are also investors — is a shrewd move, which echoes the tactics that Apple has used to achieve its current dominance in music downloads. The revenue model, however, is based on the number of plays rather than downloading to own, “It makes paying for downloads pointless,” says Kidron.

If Beyond Oblivion achieves its objective of launching on “10-10-10” (October 10 this year), a large number of previously lawbreaking listeners could suddenly find their music collection legitimised. Since there is no obvious obstacle to applying this concept to other media, including video and print, consumers will prefer to copy the highest quality content, rather than download a camcorded rip-off, which is why rental could boom as never before.

If Beyond Oblivion has its way, the anti-piracy provisions of the Digital Economy Act 2010 could become irrelevant and, if the entertainment industry is convinced of the validity of paying for usage rather than ownership, the £0.79 that Apple charges per track could suddenly appear wildly overpriced.

Competition on the high street.

APRIL 26, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

It’s always good to see a new  retail business opening, whether it squeezes in between the 99p and the £1 discounters on the high street or unveils a flagship store in an out-of-town shopping centre. This is particularly true when the newcomer brings with it a successful track record in the supply of home entertainment hardware and software. In these tough times, anything with the potential to boost sales in this sector can only be welcomed.

Only 12 months ago, the launch of the joint UK project between global electronics retailer Best Buy and Carphone Warehouse was suddenly postponed, a victim of “the economic climate,” according to Carphone Warehouse CEO Roger Taylor. So the news that the first Best Buy UK store, in Thurrock, Essex, is to open for business a full day sooner than planned, on the last day of April instead of May Day, could herald a much-needed shot in the arm for everyone involved in digital content delivery.

It has already boosted the fortunes of Wincanton, the supply chain and business outsourcing services provider, which has inked a five-year storage and distribution deal with Best Buy UK. The company has refitted its Daventry distribution centre for Best Buy and integrated IT systems to ensure efficient supply chain monitoring.

Wincanton CEO, Graeme McFaull, described Best Buy as one of the most exciting companies in global consumer electronics retailing. “We’re both equally passionate about customer service — it’s at the core of everything we do,” he said.

The next few months will test the relationship, particularly since economies of scale will be hard to find until more outlets are added to the chain.

The opening of the Thurrock store will kick off a “four-day launch festival” that will see eager customers welcomed by blue-shirted employees from 7am onwards.

In New York, Best Buy customers would be queuing around the block at that hour, just as they did at 200 American Best Buy stores on Thursday, when “Avatar” went on sale at 12:01am.

Whether the Best Buy brand will carry the same weight with Essex shoppers and later, those in Bristol, Croydon, Liverpool, Southampton and the West Midlands remains to be seen.

Best Buy has built a good reputation in the US, where 1,070 outlets account for one in five consumer electronics (CE) purchases made each year by American households. The revenue mix of the US business shows CE products as the biggest cash generator, accounting for 39% of income for the three months to the end of February this year.

In second place is the home office category, at 33%, followed by entertainment software at 18%, which is down 3% on the 2009 figure.

The company is known for its competitive pricing, extensive product range and well-informed staff, who are all graduates of the in-house training scheme — the Blue Shirt Academy. Many of the offers in the US will be familiar to customers of Best Buy’s UK competitors, including price match guarantees, try-before-you-buy, and discounted specials. There are also bundled set-up and installation services from the “Geek Squad” that will provide 24-hour product technical support, a similar operation to the DSGi “Tech Guys” at PC World and Currys.

The fact that the incumbent competition on this side of the Atlantic has had a year’s notice in which to raise its game is a challenge that Best Buy will have to confront, as it heads for its target of 200 UK stores. Comet with 250 stores and DSGi with over 600 are among electrical retailers that will be watching with interest, as will Asda, Sainsbury’s and other supermarkets.

In a “Strategy Update” published in mid-March, DSGi CEO John Browett detailed a number of group operations initiatives around Europe, including an extensive store redesign to provide “a contemporary look and feel” for shoppers. Although the document doesn’t mention the nascent competitor, focusing instead on the run-up to the end-of-year peak, it details the group’s intention to ensure that DSGi operations are match-ready when Best Buy opens its doors on Friday.

The transformation programme has concentrated on megastores and the 2-in-1 combination of Currys and PC World, which consolidates both operations in a single location. So far 141 stores have been updated and a further 150 transformations are planned for the current financial year.

DSGi claims to have identified 100 Currys locations for the 2-in-1 stores, part of a rationalisation from the current 664 outlets to a future total of around 500. With an 18% customer overlap, there are obvious cost savings to be achieved from the dual branding strategy. Perhaps coincidentally, the combined range of products will also mirror the Best Buy UK offer more closely.

Up to 24 million households are in the catchment areas of DSGi stores and 33 million customers are on the corporate database, purchasing power that Best Buy could take time to equal. Some 4,000 employees have been through DSGi’s equivalent of the Blue Shirt training academy and the company has run 250 supplier training workshops over the past year.

Best Buy has been at the forefront of digital content delivery in the US, thanks to its deal with Roxio CinemaNow which includes pre-installation of the necessary software in virtually all the electronic devices the company sells, from internet-connected TVs and Blu-ray players to mobile phones. The company has taken a pro-active approach to marketing digital delivery by ensuring that all employees are familiar with its benefits and able to explain them to customers.

It is not surprising that the company plans a similar approach in the UK and is collaborating with Virgin Media to showcase the advantages of superfast broadband and the connected digital home.

As the result of Best Buy research, which revealed a pent-up consumer demand for a better retail experience when buying games, an in-store area will feature the latest games consoles and a highly specified HD Home Cinema installation with 5.1 sound. To be known as the Ultimate Games Experience room, it will allow customers to sample the latest audio, video and games technology before they buy. The company has yet to explain how they plan to keep the area free from teenagers vying for the highest scores.

Best Buy already has a strong online presence in its existing markets and the most recent financial report stated e-tail revenues of $2 billion, a year-on-year increase of 20%. This represents a mere 4% of current group income but the UK operation will no doubt seek to ramp up web transactions quickly.

For comparison, the Dixons and Pixmania e-tail brands, which benefit from the shared DSGi supply chain, generate £1.4 billion a year between them. Tesco and Amazon are among several other established online CE retailers, in an area where price competition is at is most aggressive, so it will be interesting to see how well the newcomer fares.

The current emphasis appears to concentrate on communicating the physical arrival of Best Buy stores in the community. While the bricks and mortar megastore strategy could help bring credibility to the brand, a strong online presence in the future will enfranchise the large number of potential customers who are not within easy reach of the new stores. However, some of the key brand values, particularly in the area of customer service, might prove difficult to communicate to shoppers seeking the best deal and the fastest delivery.

The chain started with a small retail audio store in St Paul, Minnesota, which was opened by Richard Schulze in 1966. As it grew, the original name, Sound of Music, was changed to Best Buy in 1983 and today the company employs more than 150,000 people in the Americas, Europe and China. The desire to reflect and maintain a close link with the customer is a thread that runs through the history of Best Buy and can be seen in the pre-launch web site, which features green issues, community forums and employee blogs.

The arrival of Best Buy UK will undoubtedly create jobs and enliven the home entertainment landscape at a time of uncertain delivery methods and accelerating technical change. If that change moves in the direction of deeper discounting and a reduction in over-the-counter retail transactions, Best Buy could face an uphill struggle to make an impression in what might already be an oversupplied marketplace.

After the shock of the launch postponement in 2009, no-one wants to see this week’s newcomer become last week’s news.

Where is 3D leading?

April 19, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

It’s becoming clear that 2010 will be an outstanding year for advances in TV technology as 3D is pushed at consumers from all sides. Over the past week, several announcements have been made heralding what could become a “summer of three dimensions”. Given the investment that is being made in content, hardware and hype, there must be a good number of corporate finance directors who are starting to cross their fingers.

At the National Association of Broadcasters convention in Las Vegas, four US media companies revealed plans for 3DTV services. Discovery, Direct TV, CBS and the sports network ESPN all intend to offer 3D content from this summer. Around 40 different 3DTV models will be available from major CE manufacturers in time for the launch together with the necessary “eyewear”. Almost all will require the use of “active glasses”, which darken left and right lenses sequentially, in time with the left/right sequence of images on the screen.

This news indicates that the industry trend is to go with the “cheap screens, expensive glasses” option, which requires consumers to purchase additional glasses beyond the two pairs that will be supplied with each screen. Companies such as XpandD, which already supplies glasses in the UK for the NFT and the Picturehouse Uckfield among others, already have consumer products in their catalogue.

These after-market vendors are expected to benefit from consumer demand as 3D becomes more popular although at around £100 a pair they will be hardly an impulse buy. Glasses that are “accidentally” brought home from cinema trips will not work, though some will no doubt try, and there are “running costs” for active glasses: each pair requires a new battery every couple of months.

In the UK, BSkyB plans for a 3D television channel really start to gather pace from May onwards. The company already has announced that the current generation of Sky HD boxes will be 3D compatible and all the major CE companies will incorporate the Sky 3D standard in their hardware. Before long, many of the flat screens on sale will be not just HD-ready but 3D-ready too, so it is as well that HD and 3D are compatible.

At the moment, technical standards continue to evolve at several points in the chain, a matter of some concern for producers. Consumers, however, are unlikely to discover that the 3D TV they buy in 2010 is outdated by next year unless holographic display prices fall dramatically.

Sport is expected to benefit from 3D coverage and as the FIFA World Cup 2010 approaches, 3D TV press releases have fluttered into view on all sides. Official sponsor Sony is not surprisingly out in front, since the company will broadcast 25 games live in 3D from South Africa.

England will not feature unless they reach the quarterfinal, and those UK football enthusiasts who want to watch the games in 3D will either have to camp out in Sony dealers or avoid the results until Sony releases a Blu-ray 3D disc of the coverage later in the year.

Tennis fans are not forgotten, at least across the channel, where Orange France announced that they would launch a 3D IPTV service in May, starting with the French Open. No news so far on the release date of the Blu-ray 3D version although with the long release windows in France it could be November before the disc is available.

From the amount of pre-launch publicity generated, it might be thought that we all will be watching in 3D by this time next year. Whatever the rate of uptake for 3D in the home, content owners will need to ramp-up their production rates sharply if the new channels are not to be filled with repeats. The pseudo-3D “Clash of the Titans”, however, has received a slating in the US, so producers might do well to avoid 2D conversions.

“Titans” was shot as a conventional 2D production but the booming demand for 3D led Warner to rush through a conversion using Indian facilities. The result has generated nearly $250 million at the box office but has not pleased the 3D fraternity.

The CEO of Dreamworks Animation, Jeffrey Katzenberg, told Variety, “You cannot do anything that is of a lower grade and a lower quality than what has just been done on ‘Clash of the Titans’”. He claimed that shoddy 3D will cause a backlash that will kill the format and said that the day when moviegoers wake up will be “…the day they walk away from us, and we blew it.”

Sony Executive Deputy President, Hiroshi Yoshioka, echoes his point of view. He said in a keynote speech at the NAB convention, “Poorly executed 3D is harmful and threatens its long-term success.”

One of the secrets of Blu-ray 3D production will be access to 3D-enabled authoring tools and Sony was one of the two major suppliers to announce their offering this week. The latest Blu-print 6 package for Blu-ray 3D title authoring will be available from June onwards together with Z-Depth (that’s “Z” as in “Gee!”) which “… allows 3D authoring companies to easily create required disparity metadata files for positioning of subtitles and IG menus in a 3D Blu-ray Disc production”. Stand by for a bold new dimension in jargon.

Sony’s product, aimed at professional authoring houses and video editors, includes the tools to create 3D interactive and presentation graphics, 3D BD-J integration, and the ability to generate the Blu-ray 3D disc cutting master. It is likely to appeal as an upgrade for those companies already using Blu-print and will open the doors to independents wishing to release Blu-ray 3D titles.

The other announcement came on Thursday from Sonic Solutions, which has dominated the professional authoring market since the launch of DVD. The new package, 3DAccess is intended for the creation of Blu-ray 3D content and 3D distribution over the web. This could be an important step in bringing 3D to the home, since it combines authoring for both packaged media and online delivery in a single suite of production tools.

Sonic Solutions is well placed to exploit new 3D avenues since it is part of a group that includes the Roxio “CinemaNow” brand, which has close links to the Hollywood Studios. Premium filmed entertainment, both download-to-own and Pay Per View, is available online from CinemaNow, often day-and-date with DVD releases. The CinemaNow technology is behind the Blockbuster Online and BestBuy online services in the US and is pre-installed on a variety of devices sold in BestBuy stores from connected TVs to Blu-ray players and smartphones. It is now poised to add 3D to this portfolio.

The wider acceptance of 3D will increase pressure on available bandwidth of all the delivery channels, however, and threatens to widen the gap between the superfast fibre “haves” and the ADSL “have-nots”. The universal commitment to 2Mbps is laughable in the face of the high-performance demands made by 3D programmes. Without a guarantee of at least 6 Mbps, 3DTV over broadband will remain beyond the reach of many UK homes, which could prove a big bonus for Blu-ray 3D sales.

So can those investors and financial directors who have authorised their companies to speculate millions on 3D now start to uncross their fingers and enjoy a few profitable years? After all, so far it has worked wonders for the cinema.

Theatrical origination in 3D is certainly enjoying a boom and this will continue to create short-term enthusiasm for the format. It may also provide a resource that future generations will appreciate, even though it falls a long way short of a true 3D rendition of a scene. But content producers are not philanthropists and unless the revenues start to match the investment, the inevitably higher production costs are going to be counted against income.

When audiences tired of shaky “cardboard cut-out” 3D with red/blue glasses, Hollywood was swift to abandon the format. This time the stakes may be higher but the economics remain the same. For as long as consumers believe that 3D without glasses is just around the corner, media companies might need to keep searching for ways to reach a financially viable audience.

The 50p broadband tax

APRIL 11, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

Among the 14 Bills given a hasty passage at Westminster this week, to be nodded through in the so-called “wash-up” procedure before parliament is dissolved, was the much-revised Digital Economy Bill. What started as a reasonable basis for discussion has been cobbled together in an attempt to please everyone.

As Wokingham MP John Redwood said in the debate, “Clauses 10 to 18 … are a blank cheque saying that orders will be laid in due course. We have no idea whether they would work or how they would be constructed.”

This digital dog’s dinner will make it hard for a new government to come up with a well thought out strategy for the future of Digital Britain, given the baggage that it will inherit. The good intentions evident on all sides when the Digital Britain report was published last year have unravelled into a hell of poorly drafted laws that could prove unenforceable in practice, whatever road the electorate may take on May 6.

Something that failed to make it through was the 50p “phone line levy”, which had been introduced in an ill-starred attempt to fund a broadband infrastructure worthy of the name.

Shadow Treasury Minister Mark Hoban, quoting from the government’s own regulatory impact assessment, said in the debate that the tax might have driven up to 200,000 homes to abandon broadband. He noted that Virgin Media was vehemently against the tax, suggesting that it would distort the market, penalise fixed line broadband and potentially disrupt next generation broadband investment plans.

Take away the tax, however, and what could be put in its place? It’s all very well to let “the market decide” but, as Australians have already discovered, private enterprise will always follow the money. “Fibre to the outback” is not a sufficiently lucrative proposition to ensure that telecommunication companies will rush to deliver broadband to outlying areas. The same might be said of the United Kingdom in “remote” rural areas in Kent.

Last year’s decision by the Canberra government to bypass proposals from existing operators and establish a public and private partnership to construct Australia’s super fast National Broadband Network (NBN) was a bold step, which will eventually connect 90% of that nation’s households at up to 100 Mbps. The new company, owned jointly by the government, as majority shareholder, and the private sector will invest up to A$43 billion over eigh years to build a national network.

The scheme will be partly funded by “Aussie Infrastructure Bonds” to be sold to householders and financial institutions alike, and the government expects to sell its assets back to the private sector on completion at a substantial profit for the Australian taxpayer.

NBN also guarantees it will provide the remaining 10% of premises in Australia with “next generation wireless and satellite technologies that will deliver broadband speeds of 12 megabits per second”. Something equivalent to that NBN guarantee has been missing from UK proposals so far and now it has to wait for the attention of the incoming government.

In the debate on the Digital Economy Bill in the Commons, outgoing Treasury Financial Secretary Stephen Timms told MPs “about 10% of homes still cannot get a 2 megabit-per-second broadband service.” Even this figure might not be entirely correct since it is believed to refer to “10% of broadband connected homes”, and does not include the larger proportion of the country who live outside existing broadband service areas altogether.

Just as Australia plans to use wireless and satellite technologies to reach the “final 10%”, WiMax operator Clearwire in the United States delivers an average of 7GB of data a month to each of its “unlimited broadband” subscribers in 80 markets across the country. As with the competing “Long Term Evolution” (LTE) technology, which brings speeds of between 20-80 Mbps to Scandinavian users, mobile broadband is helping to bridge the gaps that neither copper nor fibre can reach economically.

The success of broadband dongles, even in the restricted and relatively slow-speed context of the UK’s 3G phone network, should demonstrate the folly of taxing all landline telephone users in order to provide high speed connections for a lucky few. Compulsory funding for faster broadband using money from pensioners, the poor and the underprivileged is never going to prove popular, even at 50p a month plus VAT.

Whatever route is taken to financing the installation of an appropriate high-speed broadband infrastructure in Britain, it is unlikely that we’ll follow the lead of Google in the USA, though the company was granted a two-year moratorium on paying tax in the UK by the Treasury.

In the Digital Economy debate this week, outgoing Kent MP Derek Wyatt drew attention to an earlier statement from ITV that said, “Google will take more advertising revenue this year in the UK than the whole of commercial television”. Perhaps the new government should look beyond a “phone tax” for funding and consider instead who stands to benefit most from faster broadband connections.

The suggestion might not be entirely without merit, although in some parts of the world Google is already contributing. In February this year, the company announced a competition between cities in the US, with lucky locations winning free installation of ultra-high-speed 1 gigabit per second fibre broadband to homes and businesses in neighbourhoods of between 50,000 and 500,000, paid for entirely by Google.

It is part of a long-term plan to find out if access to virtually unlimited broadband will generate wealth in the community and lead to the development of bandwidth intensive applications that are currently unimaginable. Although the tech-savvy West Coast cities are drooling at the prospect, Google is thought to favour the run-down and almost bankrupt cities in the mid-west and south of the country.

The company has promised open access to the system, so presumably other search engines will be allowed. In the announcement they promise, “We'll test new ways to build fibre networks to help inform and support deployments elsewhere, and we’ll share key lessons learned with the world.”

The UK will probably have time to analyse these results before implementing the measures in the Digital Economy Bill, especially since, at gigabit speeds, a Blu-ray 3D HD title could be downloaded in just four minutes, making it very difficult to identify as an illegal act.

Whatever priorities the incoming UK government might have, sorting out the future of broadband in Britain must be a top priority, starting on May 7. The electorate can only hope that the influx of new MPs will bring some fresh thinking and a House of Commons more digitally literate.

Once the new intake settles in, maybe a good first step in finding the funding for superfast broadband would be to look at those Google advertising revenues. In searching for ways to pay, our decision makers should also consider the vested interests that other parties might have in creating the infrastructure needed to build a successful Digital Britain. The licence fee, anyone?

IPTV secret sauce is content

MARCH 29, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

Search for IPTV on the internet and you are likely to find the home page of Iowa public television. While there is nothing wrong with that august institution, those living outside the United States might wonder why their local broadband supplier has signed up with a Midwest American broadcaster.

When the boffins looked for a catchy name for internet protocol television in 1995, they must have spent a lot of time in focus groups before finally deciding to name it IP/TV, which seemed such a good idea that it was crowned with a trademark. Their first efforts failed to make any discernable impact on consumers, however, so they went back to the image consultants and returned with IPTV, which it has remained ever since.

After 15 years in the melting pot of ever-changing technology, IPTV has started finally to capture public imagination. A recent survey from analysts Point Topic for the Broadband Forum shows that France tops the global league table with over 8 million subscribers watching IPTV, amounting to 42% of all broadband users there. Next, some way behind, are the US and China. By the end of 2009, there were more than 33 million homes in the world with IPTV, a year-on year-increase of 47%, the survey said,

For those still confused by the link with public TV from Iowa, this might be a good moment to clarify the confusion. Thanks to Informa Telecoms and Media Principal Analyst, Simon Murray, who was speaking this week at the sixth IPTV World Forum, we learn that IPTV means different things in different countries. The French are happy with programmes that come through their phone line even if they are not sure how it is done. In the UK and other parts of the world, broadband enthusiasts who are quite content to watch programmes from the likes of BBC iPlayer and Hulu have been referring blithely to the service as IPTV, when it is clearly OTT (Over The Top) television.

In the UK, of course, we’ve been used to TV that was OTT for many years, starting around the time of “Monty Python”, but this is something completely different. The rate of change being so rapid in this industry, however, by the third day of the conference both IPTV and OTT had been replaced by another term altogether.

Telecom solutions provider Huawei Director of Marketing David Strehlow told a shocked audience: “IPTV is not IPTV any more. It has morphed into the Digital Home!”

Strehlow went on to say that Huawei customers are already “making millions from OTT”, and that with the arrival of the Digital Home there will be no significant divide between OTT and IPTV.

So what will the Digital Home ever do for us? You mean, aside from provide a completely integrated home network, a world in which no device is an island and every consumer electronics box talks to all the others in the same language? Well, exactly that, actually.

Despite the best efforts of the vested interests who produce these things, the multitude of boxes, cables, networks and other technical necessities are becoming – horror of horrors – compatible. No longer will customers for the new technology need five different plugs to fit into four different sockets. Silently and often wirelessly, the technology links up.

Without the need to explain why hardware should be at the heart of the connected home of the future, speaker after speaker at the IPTV conference stood up and extolled the merits of the “secret sauce” that is going to make everybody rich. Yes, it’s content!

Content “over the top” (OTT) is epitomised by the BBC iPlayer, Spotify and SeeSaw. It is delivered over what the experts like to call “the open internet”. Users go to their chosen web site, pay a subscription (or get it free) and stream content to anywhere in the home. As long as the connection is fast enough, and not too many other users are trying to get online at the same time, OTT works very well.

Holding back OTT services back until recently has been the fact that it almost always meant watching on a desktop or laptop computer, with none of the benefits of family viewing around the fire. Both TV and computing have moved on, and in the Digital Home every screen is just a screen, wherever it is located, and sound and pictures can be distributed to any or all of them.

As this week’s deal between Google, Intel and Sony indicates, the TV is no longer a dedicated device set up purely for the purpose of watching home entertainment. In the brave new world we will all have Google TV and perhaps the term “television” itself will cease to have a significant meaning. There is the “anywhere, everywhere” proposition, typified by taking content with you on a journey that starts in the kitchen, continues on the train and ends in the office — although that may be taking the Digital Home too far.

When the internet was conceived, every device attached to the network needed a unique “address” that would say where data came from, where it was going and what “protocol” or language each device could understand. As with an international phone number, an IP address is a unique identifier, which should exist in only one place on the planet.

Once you know how your data should be formatted and where it is going, you can ensure it arrives at the right place, the right time, and in perfect condition. Unlike the constantly changing and inherently unstable world of the open internet, so the story goes, an IPTV connection can guarantee the quality of service that subscribers pay for.

That argument, suitably translated, has found favour with the French and, together with a high-speed broadband infrastructure, subscribers are happy with IPTV entertainment. Unlike OTT video, glitches and buffering are rare, and figures from around the world show a consistently high level of customer satisfaction with IPTV services.

As a result of the move to secure reliable delivery, content owners have started to deal directly with the operators. João Mendes Pedro, Marketing Manager of IPTV operator Clix in Portugal, told Cue Entertainment: “We’ve been trying to negotiate directly with companies such as Warner, Disney and Sony since 2005. At first, they referred us to third parties but for the past two years we have been talking directly to the major content owners and it has been worth the wait. Now we have an excellent relationship and our sales team is winning market share from cable operators.”

From a total of 3.6 million Portuguese households, 1 million are already passed by the fibre-to-the-home (FTTH) connections that will make advanced services such as Video On Demand, digital video recording and PayTV possible.

Add the Digital Home to the high-speed FTTH network and just one thing more is needed – investment to make it happen. That’s where the Broadband Forum comes in: to bring together the diverse technical standards and ensure a trouble-free uniform package for the home.

For operators, there is a real financial incentive in replacing the incompatible first- and second-generation dumb boxes in many broadband households. The smart hardware of tomorrow requires little installation or configuration. It allows remote diagnosis of problems and connects automatically with everything else in the Digital Home. This means an end to the majority of expensive technical support and fewer, if any, house calls. The money saved can be used to upgrade the network and we all get to watch it in our Digital Homes, and forget about IPTV.

Which will be good news for Iowa public television.

Terminator Skynet Edition

MARCH 20, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

Way back in the mists of time, when the digital media experts at the Nat West bank thought there was “no future in DVD because everyone will have broadband by the year 2000”, the UK DVD committee faced a major predicament. The sales figures coming in for the new format were going off the chart faster than anyone expected and all the indicators pointed to a massive success for the Digital Versatile Disc.

No matter how much they tried to fiddle the figures, it seemed impossible to stay within the realms of the credible. In the end, there was only one solution. The decision was made to tell the media that year-end DVD volumes would be a fraction of the optimistic number that the spreadsheets foretold. Committee members agreed: “If we give them these figures, they’ll never believe us!”

In the event, DVD sales in 1999 exceeded every optimistic forecast, achieving the published target by mid-year and, as everyone now knows, going on to be a massive success.

In 2003, Cue Entertainment reported that Sony had a $3,800 Blu-Ray HD recorder on sale in Japan. Today, the Sony BDP-S360 with support for all the latest BD Live features is less than £120 at Play.com, including a bundled copy of the Steelbook edition of “Avatar” to be delivered when it is released on April 26. Several other of Blu-ray brands are available in the UK at or around £100.

The price point is significant and not only because the Office of National Statistics announced this week that the cost of Blu-ray players has been added to the list of products in the national shopping basket that is used to calculate inflation. British Video Association Director General Lavinia Carey called it a “milestone moment” noting that more than half of UK households now own an HDTV screen. “Sales of Blu-ray players are going to continue to grow,” she told Cue Entertainment.

Unsurprisingly, in light of their early lack of enthusiasm for DVD, the British national press hasn’t seen Blu-ray in quite the same light. This time last year, the Daily Telegraph followed the same negative line about high definition packaged media that newspapers had taken 10 years earlier on DVD. According to a “technology expert” quoted in the paper last year, “The increasing number of homes to have SkyPlus or other set-top boxes that allow viewers to record their favourite films directly onto a hard drive is making many viewers realise they don't need a Blu-Ray. Many people are also downloading films onto their computers…”

By mid-year, the story had changed. “Blu-ray disc sales rise despite the recession”, was the story, quoting figures from the BVA that showed 3.1 million discs were sold in the first half of 2009. In February this year, the newspaper took an even more positive line: “Blu-ray disc unit sales rocketed 167% last year, helping to steady the falling DVD market in Europe.”

Not quite the turnaround that DVD achieved in 1999 perhaps, but portents for the format nevertheless are starting to look good. With 3D coming over the horizon and Blu-ray the natural platform for the high quality sound and pictures that are needed to make stereoscopic television a success, surely packaged media is back in the game!

Up to a point, as they say, but there are some disconcerting signs that many of the titles on sale in the UK are little more than DVDs with 1080p pictures.

Anyone who has seen the impressive features that are offered on the “Terminator 2: Judgment Day” Skynet Edition will understand that Blu-ray is much more than a better DVD. From the seamless integration of the picture-in-picture content to the superbly implemented menus, this title is a near-perfect example of what Blu-ray can do.

The quote “viewers realise they don’t need a Blu-Ray,” might well be turned on its head. Watching “T2”, viewers realise precisely why they do need a Blu-ray. Certainly, a hard drive can store sound and pictures of equal quality, if you have the bandwidth to download 50GB of data. With drive prices falling all the time, you could probably store 15 or 20 films at a time. Crucially, however, the experience would be nothing like the same. With titles like “T2”, Blu-ray is seen to be interactive media “par excellence”.

So it is all the more surprising that the forthcoming release of “Avatar” from Fox will be shipped in a plain vanilla version, without a trace of bonus content, not even a trailer. Producer Jon Landau told the Los Angeles Times, “Everything that is put on a disc takes up room — the menus, the extras, the trailers and studio promotions — and we got rid of all of that so we could give this movie the best picture and sound possible.” That, of course is true.

It may also be true that demand for this record-breaking movie on Blu-ray will be so great that multiple versions will be released in the coming months, culminating in a “collectors edition” with all the goodies that Blu-ray has to offer – after all, “T2” has had almost 20 years to get it right.

The question “what is the point of bonus material” has been under discussion since the launch of DVD and it is true that the inclusion of static photos of cast and crew, accompanied by a few sparse lines of text, was about all that could be mustered in the early years. The BBC’s “Walking with Dinosaurs”, authored at Deluxe in 1999, was one of the few DVD titles to use the technique of “seamless branching”, which allows the viewer to take a detour into behind-the-scenes content without the need to stop, select a menu option and then return.

On DVD, the technology needed to implement this trick was scarce and expensive and the so-called “value-added material” usually languished in an obscure corner of the main menu, seldom to be seen. The advanced technology that makes Blu-ray possible includes seamless branching and much more, allowing extras to be linked to the content in a timely and interactive way.

Unfortunately, the ability to do this has arrived at the same moment as the emphasis on cost cutting, with the result that the majority of Blu-ray titles have little to differentiate them from the equivalent DVD. In a perfect world, seen on a perfect TV, the audio-visual quality would win over those of us who care. For most viewers however, there is little justification for premium pricing for a Blu-ray disc.

If filmed entertainment for the home is to be sold on price alone, it is not surprising that consumers opt for digital downloads, legal or not. When the Blu-ray experience is crafted with the skill and sympathy for the content that Blink Digital Studios in California and Sofatronic in Germany have dedicated to the “Terminator 2” Skynet Edition, then the “added value content” can live up to its name.

Sources at Fox said “Avatar” will make history as the first Blu-ray new release from a major studio to hit stores without a single trailer or promotional content of any kind. Undoubtedly, this upcoming release will be a treat for the eyes and ears and will provide a welcome boost to packaged media revenues but will it do much to establish the unique benefits of Blu-ray in the minds of the consumer?

Copyright Law in the UK

March 15, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

Piracy has been on the agenda again over the past week. Film Distributors Association President Lord Puttnam said that children must be taught that downloading copyrighted material illegally is wrong. Film content must be available legally online to discourage the use of illegal download sites, he said, but “the concept of intellectual property and its value needs to be embedded inextricably into the school curriculum”.

The Oscar-winning former film producer said it is a mistake to allow internet service providers to pretend they are not part of the retail chain. “If you or I wanted to open a chemist shop, we would have to pay attention to health and safety and the nature of the products that we sold,” he told The Guardian. “Somehow or other we’ve allowed the ISPs to drift into a mindset that’s allowed them to think that they are somehow inured to the forces of the law.”

Some of the country’s top ISP executives were heard to disagree as the Digital Economy Bill makes its way through the House of Lords toward a third reading on March 15, which offers the last chance for amendment before moving to the Commons.

Sponsored by Lord Mandelson at the Department for Business, Innovation and Skills, the bill is intended to give the legislative a framework that will ensure the UK is at the forefront of the global digital economy.

It is based on the white paper “Digital Britain Final Report”, which was published in June 2009 after a period of industry consultation. A specific commitment to legislative change and the introduction of measures to tackle illegal file sharing was promised at that time and visitors to the BSI web site today are told that the current bill “will drive the UK’s vital creative and digital sectors to bolster future growth and jobs”.

Kent MP Derek Wyatt, however, fears that the bill could be rushed through the Commons without proper discussion in a process known as the “wash-ups”, designed to ensure that pending government legislation is passed before a general election.

Wyatt spoke on Thursday at a meeting of the British Computer Society where BCS President Elizabeth Sparrow said “The bill could have huge consequences for online activity that are currently poorly understood.”

She acknowledges the importance of the creative industries and the need for copyright legislation but she warns that, “Better legislation is preferable to hurried legislation”.

In the parliamentary debate on the bill, Lord Puttnam expressed a similar view. “Within the next two or three years, there will be another bill before this house that will be created to deal with the deficiencies of the present bill,” he said during the committee stage. The house was discussing amendments to the controversial Clause 17, which deals with sanctions to be applied against illegal filesharing and the role of the ISPs in preventing it.

“Many of us in this house have come in having just had our ears bashed – either by the record industry or some other aspect of special pleading,” Puttnam said later. He suggested that much more time was needed to assess the implications of Clause 17, commenting that the lobbying process that has gone into the bill has been destructive and not very much help at all.

The BPI, which represents the interests of the record industry, has been in the forefront of attempts to lobby politicians of all flavours on the Digital Economy Bill and, according to some reports, they played a major role in what was to follow.

As the bill entered the report stage in its passage through the Lords, a new amendment was introduced that surprised many observers. The “smoking gun” for the wording points directly at BPI Legal, which drafted “a wholly new Clause 17”, almost identical to Amendment 120A that was tabled by Lord Clement-Jones.

Amendment 120A might not have the resonance of the French law known as “Hadopi” – the three strikes law, which caused so many problems for President Sarkozy last year – but it bears many similarities. Earlier this week, researchers at the University of Rennes said that illegal downloading in France has increased by 3% since Hadopi 2 was introduced last autumn.

According to a study of 2,000 internet users in Brittany, filesharers have been finding other ways of accessing illegal content online without getting caught. Just 5% have stopped illegal downloading while 10% abandoned peer-to-peer services and switched to other ways of feeding their habit. It was also revealed that the result of the complex legislation is that no warning letters have been sent out so far.

In the House of Lords, Amendment 120A, replacing the government-sponsored Clause 17, was unexpectedly carried at the report stage, leading a group of movers and shakers in the digital world to rise up and protest in the national press at what they describe as “a very serious step for the UK to take”.

The 18 co-signatories of a letter to the Financial Times ranged from Virgin Media CEO Neil Berkett and Google UK MD Matt Brittin to Stephen Fry, Orange CEO Tom Alexander and BT Chief Executive Ian Livingstone.

“Put simply, blocking access as envisaged by this clause would both widely disrupt the internet in the UK and elsewhere and threaten freedom of speech and the open internet, without reducing copyright infringement as intended,” they wrote.

There is a degree of special pleading, since many of the organisations represented in the letter are ISPs or run online services such as Facebook and YouTube, but clearly the unexpected ramping up of potential obligations and possible penalties caught the writers by surprise.

The letter continued, “This debate has created tension between specific interest groups and the bigger prize of promoting a policy framework that supports our digital economy and appropriately balances rights and responsibilities. All parties should take steps to safeguard this prize and place it at the heart of public policy in this area.”

Amendment 120A – “Preventing access to specified online locations for the prevention of online copyright infringement” – now becomes the new Clause 17 and is likely to proceed to the Commons in that form. The forces ranged against any form of online control will be encouraged by this open dissent and, with the election approaching, an unsatisfactory bill may be passed into law in the “wash-Ups.”

Mark Thomson MP told the BCS meeting, “In 20 years’ time we will look back at the bill and say: ‘What was the government trying to do?’” Postal Affairs and Employment Relations Minister Lord Young of Norwood Green might give us a clue.

“Online copyright infringement is estimated to cost in the region of £400 million per year,” he told the House of Lords during the debate. He described the loss as a dampener on the creative industries and their ability to build new commercial online models. “Blocking access to websites is an enormous step,” he said, noting that many sites hosting infringing content might also contain legitimate material. “Simply leaving it to the courts to do that without any guidance or assistance does not seem sensible,” he said.

The trickiest issue is likely to be links to sites that would be caught by Clause 17 but that don’t have any control over or even knowledge of the content to which they link. He said that search engines could end up on the wrong end of a blocking order: “Something that I think will cause significant public disquiet.”

In an echo of what is happening in France, Lord Young warned of ways round the proposed blocking of specific sites. Noting that up to 7 million people might be infringing copyright online, he said, “The adoption by 6 or 7 million people of evasion technologies would be a very substantial change in internet user behaviour. It also assumes the service provider’s responsibility even when it cannot reasonably be in a position to prevent the harm complained of.”

Consumer Focus Chairman Lord Whitty noted that there is significant hostility to the threat of intervention whether through bandwidth throttling or the suspension of the internet connection. “We should go back to a strategy that is aimed at moving everybody onto a lawful system,” he said, rather than apply the sanctions proposed in the bill: “It includes nothing about a lawful system, nothing about support for the creative industries and nothing about making access easier and more flexible.”

According to Lord Whitty, Consumer Focus research shows that 75% of consumers know they don’t understand what is lawful and what is unlawful. They also believe that copying a CD or DVD they have bought to another format is legal while 86% do not believe that it should be unlawful.

Education is clearly needed at all levels of society, though if the importance of intellectual property is to be added to the school curriculum it will take a while for the knowledge to work its way through to the legislators of tomorrow.

It is a bizarre quirk of the British parliamentary system that the key debate on the country’s digital future should take place in the hereditary chamber of parliament. Without the benefit of a GCSE in piracy prevention, it might be too much to hope that their Lordships will come up with a satisfactory solution to the problems of today.

Does legal action win market share

MARCH 1, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

There are currently two ways of establishing market dominance for a consumer media device: a format war or a legal battle.

The fight between Blu-ray Disc and HD DVD was a format war with the clear outcome of a single universal standard benefiting consumers and content providers alike. Today, you can have any high definition packaged media format you want as long as it’s Blu-ray and, with very few exceptions, any disc will play in any player.

Format wars are fought in the open market place with claim and counter-claim confusing the consumer until one side or the other retires hurt and the winner goes on to greater things. They may be expensive – sometimes fatal – for the companies involved but in the long term the free enterprise approach has its advantages and a single format emerges. “Standards are good, that’s why there are so many of them,” as the saying goes.

Sometimes, however, the struggle for standards is subsumed in a series of skirmishes as multiple players struggle to define what system will be adopted and which one will fall by the wayside. It is hard enough for consumers to decide what is best when there are two competing formats but when multiple options are on offer it can take years for the best legal minds in the world to adjudicate on who invented what and when and award a pyrrhic victory to one side or the other. For instance, take the smartphone.

Money for patent lawyers

The suppliers of mobile phones, including Apple, Nokia, Sony Ericsson and the Blackberry inventor, RIM, appear set on spending large sums of money on patent lawyers rather than work towards a single media format. The aim may be a single unified platform, as with packaged media, but unlike the partners in the Blu-ray project, the competing organisations appear unwilling to share the proceeds that standardisation would bring.

“We can sit by and watch competitors steal our patented inventions or we can do something about it. We’ve decided to do something about it. We think competition is healthy but competitors should create their own original technology, not steal ours,” said Apple CEO Steve Jobs as his company announced legal action against Taiwan phone manufacturer HTC, which produces smartphones using the Android operating system from Google.

HTC started life making phones for others before the agreement with Google allowed it to gain almost 7% of the market with handsets such as the Nexus-1, a figure that is expected to rise to 10% by the end of 2010. Market analyst IDC has forecast that at the current rate of growth, the Android operating system could be in second place by 2013.

While the proportion of US iPhone users that access the internet declined by 10.2% in the year to February 2010, the Android share of the market rose by 95.3% to take second place. Although coming from a much lower starting point than iPhone, the threat to Apple’s dominance has not gone unnoticed. Rather than go for Google directly, they decided to take on HTC first.

Apple is determined to protect its dominant market position. iPhone generated $13 billion for the company in the year ending Sept. 31, nearly one third of its total revenue. A patent battle with Nokia is already underway with claim and counter-claim on both sides as Nokia seeks to force Apple to license some of its technology. Apple COO Tim Cook refuses to consider the idea, telling shareholders “We’re certainly not in the business of licensing good ideas. That’s not what our business is about.”

Blackberry manufacturer RIM settled an argument with patent owners Visto last year by paying $267.5 million for the rights to “a perpetual and fully-paid license” that ensured the Blackberry would continue. The company previously had settled another licensing lawsuit with a massive $612.5 million payment to NTP Inc. The benefit has been the continued growth of the Blackberry platform but a question mark remains regarding their ability to take on the market leaders when every innovation is likely to engender legal action.

Struggle between giants

For the content industry, and in particular the providers of filmed entertainment, the struggle between these giants should be a major concern. Apps have become part of the everyday vocabulary of the smartphone user, whether acquired from Apple, the Android Market or the OVI store. Consumers expect more of everything on their smartphone including games, TV and film content. The problem is that there are many different and incompatible operating systems in use, forcing developers to create multiple versions for a wide and increasing variety of handsets.

Speaking in advance of his presentation at the forthcoming IPTV World Forum in London later this month, Frédéric Tapissier, President of the Technical Committee of the France HD Forum, said that content providers already have to deal with multitude of platforms. “The exponential costs of setting up complex workflows will drive content providers to limit the number of platforms they will address and favour a standard that will allow reaching wider audiences with just one production tool,” he told IPTV News.

Smartphones are multi-tasking devices capable of being an entertainment system one minute, a communications device the next and a GPS navigator a moment after. Powerful though the Hollywood studios might be, there is no one group that can bang the heads of the mobile industry together and demand a single format for entertainment content on these devices. If and when Apple win their court case against HTC, a lot of people could find themselves cut off from the entertainment content they had come to expect.

Real Networks finally conceded defeat in its long-term battle with Hollywood on Wednesday, when the company agreed to abandon all its attempts to overturn the injunction prohibiting the sale or distribution of the disc ripping software, RealDVD. It will also refund the $30 that each customer paid for the software and pay $4.5 million to the six major studios and others who brought the case against the company.

The main casualties, apart from founder and former CEO Rob Glaser, who left the company in January this year, will be the shareholders in what was once a leader in digital delivery business. Net revenue for the full year 2009 declined by 7% compared to 2008, even before the legal judgement was announced.

Bob Kimball, who took over from Glaser as CEO once it became clear that the case was lost, said in a statement, “With this litigation resolved, I hope that in the future we can find mutually beneficial ways to use Real technology to bring Hollywood’s great work to consumers.” In all probability, Hollywood has moved on while Real’s attention was focused elsewhere.

The company arrived early in streaming media, back in 1995, with an aggressive acquisition of intellectual property that gave it a head start over some of the competitors. At a time when Apple’s Quick-Time and Microsoft’s Video for Windows were focused on playback within a local computer, Real was one of the first to spot the potential of online video and, more importantly, to work out how to monetise the technology.

All went well for several years with a big boost for the company’s fortunes coming from the BBC when the Real Player became the core of the Corporation’s iPlayer audio service. Unfortunately for investors, Glaser decided that ripping DVDs would be good business, a decision that ultimately brought him and the company into a head-on confrontation with the MPAA and the Studios.

Instead of acknowledging his mistake and concentrating the company’s efforts on the growing multitude of digital video devices, Glaser led Real into a legal battle against Hollywood, with predictable results.

Members of the legal profession spend many years rising to positions of authority in the highest courts where their wisdom becomes an invaluable contribution to the defence of our way of life. Unfortunately, their experience does not equip them with the ability to decide between Apple and Android, Symbian and RIM or even Windows Phone 7 Series.

The madness of myriad formats that oblige the BBC to spend so much maintaining multiple platforms for iPlayer has to stop. Mobile phone designers should take note of what happened with Blu-ray and support a set of standards that would be as universal as HTML and as ubiquitous as MP3. And of course, they should allow voice communication anywhere in the world.

After that, they can add as many bells and whistles as the makers can offer for the money.