All you can eat?

June 14, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

Two million iPads and counting! Pretty good for a product no one knew they wanted until the first week of April. Apple held back the European launch in order to satisfy the clamour from customers in North America but thanks to mass production they were soon back on track. Not content with launching one new product in Q2, Apple boss Steve Jobs then piled on the pressure with iPhone 4, causing more than one early iPad adopter to wish they had waited just a few more weeks. The Foxconn factories in the southern China city of Shenzen, which manufacture iPods, iPads and iPhones for Apple, will need to work at full capacity to meet the forecast demand. 


There is a shortage of one essential commodity for this new technology, however, and even Jobs can do little about it. There is simply not enough bandwidth to cope with the rising demand. Every new “MobileMe” convert to the iWorld of Apple adds to the problem: mobile phone networks were not built to handle high speed, high volume data communications such as audio from Spotify and YouTube streaming video.


The problem cannot be placed entirely at Apple’s door – other brands are available from other handset manufacturers – but the iPhone was the first portable phone with a screen good enough to tempt consumers to enjoy entertainment on the move, more so since the release of the higher resolution “retina display” in iPhone 4 with its accompanying higher data rate requirement. 


Your mobile phone operator doesn’t like it and operators ranging from AT&T in the US to Vodafone and O2 in the UK are reconsidering their “unlimited download” packages, which they originally offered to attract users to their network. As they have discovered, multimedia services are hungry for all the space available.


Premium audio from the online music service Spotify runs at 320 kilobits per second (kbps) and one hour of listening will get through 144 Megabytes (MB) of data. A standard definition video from YouTube consuming, say, 1 Megabit per second (Mbps) will eat up 7.5MB for every minute spent watching puppies do amusing things. Long form video requires the network operator to deliver around 450MB of data per hour of entertainment. 


O2 CEO Ronan Dunne writes in a semi-official blog that “unlimited” is a thing of the past. The company will cease to offer unlimited data packages to new customers, replacing them with fixed tariffs for usage of 500MB, 750MB and 1GB, which should ring warning bells for any regular mobile multimedia fan. Three and a half hours of continuous 320kbps music could wipe out the lowest tariff, a single feature film could account for all of the highest. Dunne’s claim that “only 3% use more than 1GB of mobile data per month” needs to be taken with a large pinch of salt although it is strikingly similar to US statistics that were released by AT&T last week. 


Dunne says that “a small fraction” (0.1% or 2,000 users) accounts for 36% of all the data delivered and “only a tiny number” use more than 1GB per month. This is at variance with data from the international network specialists Cisco, which says in its annual global mobile data forecast, “The average mobile broadband connection generates 1.3GB of traffic per month, equivalent to about 650 mp3 music files.” 


The Cisco data shows that consumers in mature markets such as North America and Western Europe are less likely to rely on mobile broadband for their main internet connection than users in developing countries where a fixed infrastructure does not exist. It is hard, however, to reconcile the global average usage of 1.3GB per month with O2’s “tiny number using 1GB.” 


O2’s data also looks out of line with the figures released by the internet audience measurement company, ComScore, which shows online video viewing to be up 37% on 2009, with 5.5 billion YouTube videos viewed in February of this year alone. 


Cisco prepares an annual breakdown of when and where we use the mobile internet in the UK. In the course of a typical day, 45.6% of mobile data is consumed at home, 17.8% at work and 36.6% on the move. For comparison, US figures are 37.8% home, 19.6% work and 42.6% on the move. The statistics point to a thriving and widespread use of data on the move in both countries, the volume of which is growing rapidly.


There is speculation that operators have seen the growth of OTT (over the top) internet services such as Spotify and Crackle and have decided to take a bigger share in these emerging revenue streams. Telecoms have long felt they should be paid for delivering multimedia but their only option so far was to start an IPTV service of their own. Capping bandwidth could well be an alternative, and selling fixed amounts of data and charging premium rates for overtopping the limit might provide a short-term boost to mobile phone operator fortunes. Users, however, might well find other ways of getting their entertainment fix including a switch to available WiFi connections instead of the operator’s 3G network. 


In a pilot that will provide internet access for its customers in areas with consistently high 3G traffic and frequent complaints about connectivity, AT&T is planning a “WiFi hotzone” in Times Square in New York. By switching to WiFi, users can expect better speed and coverage with the added benefit for the operator of reducing the strain on the 3G network. Best of all from the consumers’ point of view, the WiFi service will be free and uncapped. Similar options are available from UK operators with free links to BT Openzone and The Cloud providing an alternative to 3G in fast-food restaurants and other locations countrywide.


The decision by Vodafone and O2 to end unlimited broadband, with Orange reported to be considering a similar move, comes at a moment when mobile data usage is set to soar. A report by Chetan Sharma Consulting, “Managing growth and profits in the Yottabyte era,” predicts that this year mobile data traffic in the US alone will equal the global figure for 2009. Cisco says that mobile data will generate 7 GB of traffic per month by 2014 – the equivalent of 3,500 mp3 files – and adds, “The next five years are projected to provide unabated mobile video adoption despite the recent economic downturn.” 


Back in Shenzen, Foxconn factories continue to pour out broadband devices not just for Apple but also for Dell, HP and Motorola. They also manufacture the BT Home Hub. But there has been “trouble at t’mill”. 


A series of well-publicised suicides among the work force and a pay rise of “30% now and 70% later” have changed the industrial economics for the Taiwanese owners of the factory complex. This week, there has been talk of moving production to lower cost areas of China or even to India. Reducing costs through relocation is a hard trick to pull off, particularly in the high-tech sector where disruption of the supply chain can have major consequences for a product’s success in the market.


Despite the enthusiastic welcome for iPad and its copycat competitors, hand-held devices are likely to be the victim of their own success for some time to come. The days of “all you can eat” mobile broadband data might be numbered but the price-hike by mobile operators could be the stimulus for the growth of WiFi, WiMax and LTE (Long Term Evolution) networks that competitors to 3G have been waiting for. The results could be good for online entertainment and for the sales of coffee.

Ditching DRM

June 7, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

Ten years ago, Neil MacGregor, then Director of the National Gallery, and Pierre Rosenberg, Director of the Louvre, were debating image rights and the internet. “I will never allow my collection to be viewed online,” said Rosenberg. McGregor responded that he was happy for every internet user to see what was on display in London, “After all, these are only digital representations of the real thing. If they want to see the originals, they will have to come to the National Gallery.”

Within a year, Rosenberg had gone and the Louvre launched an ambitious new website. By 2005, the gallery’s entire collection was online. Could it now be time for the entertainment industry to accept a dramatic change in Digital Rights Management (DRM) and consider online delivery as just a representation of the real thing? Network specialist Cisco has predicted that mobile data traffic will be almost 40 times greater by 2014 than it was at the start of this year. Two thirds of that increase will be video, not just for delivery to smartphones but also for laptops and tablet devices such as the iPad. Together with fixed broadband connections, video will account for an astonishing 91% of all consumer internet traffic by 2014 according to the Cisco forecast.

The company also predicts that by the end of this year the digital demon of peer-to-peer video filesharing will account for less traffic than conventional video streamed directly over the internet. 

There can be no doubt that packaged media revenue has fallen over the years and internet piracy has grown in parallel with the increase in broadband speed. The response of many rights owners has been to apply ever more secure DRM and seek draconian measures against those who try to circumvent it. It is not clear, however, that there is a direct cause and effect relationship between declining sales and internet growth.

Cisco Director of Service Provider Marketing Doug Webster says that telecom service providers need to consider how they can move into ancillary addressable markets such as advertising and finance.

“They can't just continue to bill on the amount of bits going through a pipe but on the overall value of what they are delivering,” says Webster. Most ISPs have seen the problem coming for some time and have responded by introducing IPTV services such as BT Vision, which after three and a half years has fewer than 500,000 subscribers. Apart from France, where more than 8 million homes subscribe to connected-TV, the concept of buying television programmes from the phone company has yet to take off.

In most countries, consumers are happy to pay their telecom provider for bandwidth but not for content. This leaves unanswered the question of how content providers will be compensated for creating film and television entertainment for the consumer.

Current models have much to recommend them. Packaged media has the merit of universal distribution and a retail channel that reaches every home in the developed world. The carrier (polycarbonate) is cheap and unit manufacturing costs are an almost insignificant proportion of the selling price. Online delivery is equally inexpensive although the overheads might appear in different budget lines and, if environmentalists are to be believed, there is little difference between physical and digital media when it comes to being green.

The packaged product, however, is durable, collectable and inherently offers higher sound and picture quality. ISPs are already struggling to deliver standard definition video and stereo sound over existing networks. Any attempt to offer 3D, HD and 5.1 audio at Blu-ray quality would make even Cisco’s figures look conservative. Not everyone wants to own a DVD or Blu-ray of every title ever made but the collector’s instinct drives sales immediately following an initial theatrical release.

As today’s blockbusters slip in to tomorrow’s back catalogue, there needs to be a viable route for new generations to discover and buy the classics (and the turkeys) of the past. With no opportunity for accidental discovery when casually browsing in-store, it is likely that many titles will cease to be available on disc. Although discs could still be available to order online, shoppers will need to know what to look for if they are to chance upon titles they might enjoy. Faced with this challenge, many will take the easy option of downloading the most heavily promoted titles and before long the collecting instinct will be lost.

Once a digital download becomes a consumable item, revenues shrink and in-depth catalogues decline. Signs of this self-perpetuating spiral are already with us.

Tesco Entertainment Category Director Rob Salter said as much in a recent interview with Cue Entertainment: “Our bigger challenge is getting people to buy a movie once. The industry seems to be under the illusion that people are avidly desperate to buy movies. They are not.” Salter makes the point that downloading a film doesn’t satisfy the collecting urge. “There’s a need to create experiences that allow people to review what they’ve collected and … recreate some of the physical experience one gets through the movie,” he said. But here lies the paradox. If people have never seen a film or a classic TV show, what is the likelihood that they will discover and want to download it, still less collect it?

There are many opportunities to come across an interesting but unseen title when walking the aisles of a well-stocked retail store. If the price is right, they will probably buy it, perhaps as an addition to the primary reason for their visit. Every one of these incremental sales increases store revenue and if they like what they have bought, the probability of a return visit increases.

Companies such as Netflix, Lovefilm and Rovi are investing large sums in “content discovery” to emulate this experience online; the idea that “If you liked that, you’ll love this” which is so well exploited by Amazon. Although the mathematical formulæ or “algorithms” that underpin these interactive programme guides are very sophisticated, they rely on purchasing decisions made in very different ways from the impulse that comes from picking up a disc and reading the sleeve. So why not encourage discovery by accepting that a relatively low resolution online version of a title does not have to carry the same price tag as “the real thing”?

Imagine an online world in which DRM is almost forgotten; in which film and TV entertainment is available online at a fraction of the current cost – pence not pounds – with few if any restrictions on sharing. Then add a much greater incentive to acquire the “real thing”. This would allow fans of “Carry On” films to post links on social networks, Buñuel enthusiasts to email friends about “That Obscure Object of Desire” and “Father Ted” followers to spread the word, all without investing large sums of money or resorting to piracy.

Of course, there will be some who continue to make illegal copies, but there would be little point if the film were accessible to all. So does this mean giving away the farm? Certainly not!

Watching a film in the cinema does not preclude the purchase of the DVD or Blu-ray, nor does the fact that it might be seen on TV or cable a few weeks after release. Many have already noted that the marketing spend on the theatrical release can provide a short to medium-term boost in sales of packaged media; promoting low-cost versions online could achieve a similar result.

By ensuring a wider audience for the entire film catalogue, rather than focusing on a favoured few features, many more fans could find films they love and want to own. Could it be that, by restricting access to the broad catalogue of film titles, we have created a system that reduces the sales prospects of packaged media without generating compensating income online?

Millions have been spent developing Blu-ray as a deluxe content carrier, delivering HD, 3D and multi-channel surround sound that outclasses most low bit-rate offerings. Outside of the cinema, it is the nearest approach to the theatrical experience that many people will have and if any home entertainment media deserves the accolade of “collector’s edition”, Blu-ray is it. Although many in the industry will raise their hands in horror at the idea of “giving away” content, there are others including Apple, Spotify and most recently Google TV, who have thought the unthinkable and are planning a future in which DRM plays a minor role.

Beyond Oblivion (Cue Supply Chain, May 24) will even offer to pay royalties to rights owners for every online performance, whether or not DRM has been applied. The internet research agency Comscore said recently that 80% of the global internet community claims to watch video online; surely a financially significant proportion of that group is searching for the real thing.

iPad and the Tablets of Fire

May 31, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

Steve Jobs’ “magical and revolutionary product”, the iPad, has been launched in the UK and now everyone can have … well, what exactly? So much technology, so little time to play, and with it comes the danger that such high-tech products and services will promise more than they can deliver unless they have access to a fast connection.  

Without reliable broadband and high-speed data infrastructure in place nationally, will Apple, Google and other manufacturers of multi-function devices choose to launch their products elsewhere, or are they simply trying to cram too much into a single package? Not so many years ago, consumer electronics companies were convinced that CE products should be optimised for a single purpose.

Although the radiogram enjoyed a brief popularity in the 1950s and 1960s, home entertainment equipment in the 20th Century tended to do just one thing, and buyers of sound and television systems didn’t need more than a couple of lines to understand what they were getting. CD? Plays great-sounding music from a plastic disc. VHS? Records and plays back what’s on TV. Walkman? Listen to your compact cassettes while you walk. Mobile phone? Call home from the train. Life was simple then.

The announcement of Google TV earlier in the month highlighted just how far we have come from the days when anyone could buy a new 22-inch TV, take it home, plug it in and be watching “Coronation Street” by 7:30. As Google CEO Eric Schmidt said when he unveiled the concept: “It’s much harder to marry a 50-year old technology to new technology than those of us from the new technology era thought.”

The involvement of Best Buy as a partner in the launch programme for Google TV underlines the need to explain the connected world to the public, now that installation requires much more than a power socket and an aerial. Best Buy CEO Brian Dunn says, referring to his uniformed teams of experts, “We have 180,000 blue shirts fired up about this new category and 20,000 geeks in case it doesn’t work perfectly.” The Sony hardware will undoubtedly perform flawlessly; it’s what surrounds it that will keep the geeks busy.

Despite this, Dunn is an enthusiastic advocate of the idea. “When you actually see what it can do and you experience it, it’s compelling. It’s not just a new aisle. We think of Google TV as an entirely new category,” he says, “When properly explained and properly demonstrated, it’s going to solve real challenges that (customers) face today.” With that, he turned to Sony CEO Howard Stringer and told him “In fact I need one – right now!”

Apple iPad enthusiasts made a similar judgement on Friday as the product was launched in the UK. Supplies were limited, with the result that some Apple stores reportedly sold out by lunchtime, although the manufacturing capacity of 1 million iPads a month should ensure that the channel will soon be re-supplied. Analysts forecast iPad sales of between 4 million and 7 million units this year but this could be under threat if, as some reports noted on launch day, mobile operators struggle to meet demand as owners try to sign-up for a high-speed connection online.

Demands on the network are likely to increase, since Apple is not alone in launching a touch-screen tablet; Dell, Sony, Archos and HP are among companies rumoured to be introducing their interpretation later this year. Acer CEO Gianfranco Lanci (pictured) was snapped in China this week demonstrating a prototype 7-inch tablet device said to be based on the Android operating system, which has already overtaken the iPhone in some markets, including the US. The link between this apparent leak and the announcement of Google TV (which also relies on Android) can hardly be accidental.

Tablets are not the only technology to take their toll on broadband networks. Blu-ray players are at their best when connected and laptops and set-top boxes require WiFi, Bluetooth and cables to deliver the functionality they promise. Then there is the TV itself, now touting widgets and interactive programme guides that depend on the high-speed internet. No longer can a single high-power transmitter mast cover millions of viewers in a metropolitan area, every connected home must have its own access.

Once retailers have completed customer education and persuaded them to buy next generation entertainment hardware, will network operators such as BT OpenReach, Orange and O2 be able to keep their part of the bargain? If the bandwidth isn’t available when it is needed, these sophisticated electronic products will fail to deliver their promise, no matter how well they performed in-store. If more than a few disappointed customers return the hardware, complaining of jerky video, long delays and poor connectivity, digital content delivery could scupper before it is launched.

The impact of low bandwidth could also affect the plans of the Digital Entertainment Content Ecosystem (DECE). This coalition of 48 companies is working to ensure common standards for multimedia entertainment, and numbers the major studios and retailers such as Best Buy and Tesco among its members, although Disney and Apple are conspicuously absent.

The proposals centre on the concept of a digital rights locker, accessible by up to five users and across a dozen or so devices, which would allow members of an average family unit to access and share entertainment content. If DECE plans are to succeed, reliable high-speed broadband networks will be required to allow shopping baskets to be filled and ensure consistent delivery of digital entertainment.

Members of this coalition have a direct investment in the quality of service throughout the supply chain from content owner through entertainment retailer to the home. Unless reliable bandwidth is assured by telecom companies and cable operators, there will be increasing pressure to bypass ISPs and follow Virgin and Sky in owning and operating the majority of the network infrastructure.

Many of today’s consumer electronics devices, including smartphones and multimedia tablets, rely on fast broadband, Wi-Fi and high-speed mobile networks. Their performance is compromised by broadband connections that deliver a fraction of advertised “headline speed” that decreases with each new sign-up for the service although, in defence of BT OpenReach and 3G network operators, the costs associated with delivering data can easily exceed potential revenues, particularly in rural areas. Nevertheless, connected devices need an advanced infrastructure around them if they are to work as intended.

As Britain continues to slide down the international league table of broadband speeds, there is a risk that future product launches will pass us by. Packaged media will probably continue to fade and if we are to look to the cloud for home entertainment in the future, we have to be able to access the latest technology at the moment it becomes a mass-market product.

To quote Howard Stringer at the Google TV presentation, “It really is a very big deal – I can’t stress that enough.”

The Digital Agenda and Google TV

May 24, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment

The Digital Agenda was released this week and it promises that by 2020 all of us will have access to a minimum of 30 Mbps broadband, with at least 50% of the population signed up to 100 Mbps services. In addition, every household will have broadband by 2013 and all public services will be web based by 2015. Unfortunately, it was published not by the Con-Lib Dem coalition, but by EU Digital Affairs Commissioner Neelie Kroes.

Here in the UK, even the “Universal Service Commitment” to a minimum of 2 Mbps has yet to be confirmed by new Minister for Culture, Communications and Creative Industries Ed Vaizey. He’ll work with Culture Secretary Jeremy Hunt as broadband minister responsible for the digital economy and telecommunications, including the rollout of broadband across the UK. His portfolio embraces Arts, Media, Museums and Galleries, Telecoms and Broadband, Digital Switchover, Creative Industries and Libraries.

 As Parliamentary Under Secretary of State in the Department for Business Innovation and Skills (BIS), Vaizey also will report to Business Secretary Vince Cable. This multi-tasking minister is obviously doing his best to single-handedly achieve the £700 million budget cuts already imposed on the BIS. Vaizey was vocal in his support for the videogame sector while in opposition, claiming that the Labourgovernment showed a “complete lack of support” for an industry that had fallen from third to fifth place in the world rankings. Let’s hope he will find the time in his busy diary to spend a moment or two addressing that and the many other issues faced by the home entertainment business.

One of his first actions at the DCMS is likely to be approval for “top-slicing” the licence fee in order to pay for better broadband. Former Lib-Dem spokesman for Culture, Media and Sport Don Foster told the Broadcast and Beyond conference on Wednesday that the coalition would ensure that “The BBC is going to have to cough up for the broadband roll-out.” So that’s the funding for superfast broadband secured.

Back in Brussels, cuts are not on the digital agenda. Kroes said that there is a need for a single digital market across Europe to enable wider access to legal online content by simplifying copyright clearance, management and cross-border licensing.

“The EU has invested 40% less in technology than the US while a third of Europeans have never used the web,” she said, as she urged EU member states to increase their investment in digital R&D to around £10 billion per year. Presumably, it’s that or higher subsidies for Greek feta. There was good and bad news for Project Canvas this week as the Office of Fair Trading (OFT) finally announced that the agreement falls outside its jurisdiction on the basis that “None of the partners is contributing a pre-existing business to the joint-venture.”

The seven project partners – Arqiva, the BBC, BT, Channel 4, Five, ITV and TalkTalk – have been waiting a long time for approval and the announcement should have brought a collective smile to their faces. Director Richard Halton welcomed the OFT’s decision. “Project Canvas aims to create an open platform that delivers a connected future for free-to-air TV and a competitive market for internet-connected TV services in the UK,” he said. “The Project Canvas partners are committed to achieving that aim.”

The bad news that others have the same aim and might be closer to the target came from the Android developers conference in San Francisco on Thursday, at the slightly shaky launch of Google TV. Untrammelled by regulatory authorities, Sony, Intel, Logitech, Adobe, Rovi and, of course, Google are among the big names that have agreed to provide an integrated web and TV system for consumers, which will be available from autumn this year in the US and globally shortly thereafter. 

If Google’s ambitious scheme to combine “the power of the web” with “the television viewing experience” goes ahead as planned, Project Canvas could be sidelined before it has even begun. Logitech will offer the important set-top box and remote control that brings Google TV to existing TVs – the gap that Project Canvas hoped to fill.

It needs only the integration of Freeview and Freesat into the UK version of its “companion box” in order for Logitech to compete head-on with the as-yet unspecified Canvas box. Sony is slated to supply Google TV enabled HDTV screens and Blu-ray players with an integrated Android operating system. Best Buy has been allocated the role of “launch partner” for Google TV, no doubt due to its track record with Roxio CinemaNow and its ongoing employee training in digital delivery. Users expecting the now-familiar web search interface will find that Google proposes a totally different way to interact with online content.

Rovi EVP of Product Management and Marketing Corey Ferengul says integration with the increasingly popular Android mobile phone platform is important in changing public attitudes. “You can’t just put an app in the TV and do nothing else,” he says, “Google TV is designed for the primary screen in the house and this opens up a new market for app developers to link mobile handsets, Blu-ray players and HDTVs.”

Rights issues are certain to be a major issue when Google TV becomes available since content will be displayed from wherever it is found on websites around the world. There is no such thing as region control on the open internet although the blunt instrument of IP blocking can restrict access for some users on a country-by-country basis. Google’s attitude to this is straightforward – they don’t see it as their job to restrict access and Google TV is just the web on another platform.

“It is going to cause the industry to think hard about rights issues,” says Ferengul, “and that’s going to lead to a dramatic change.” Rovi is naturally keen to promote its customisable TotalGuide search and recommendation package for Google TV, which Ferengul says will allow operators such as Sky and Virgin to retain the differentiation that gives them their identity.

BSkyB Group Commercial Director Stephen Nuttall said as much at this year’s IPTV World event: “An identical interface is not good for innovation and Project Canvas will deter other entrants to the market.” Ferengul points out that the Project Canvas box will not be compatible with Google TV, nor will it have the advantage of a link to the Android platform.

“The partners are investing a lot in Project Canvas,” he says, “The arrival of Google TV means that it might never see the light of day.” Others have tried to bring the open internet into the living room but none have pulled together so many loose ends. Google paid millions for the rights to the video coding system in order to give it away to users via a royalty-free licence.

The open source web interface is based on Google’s Chrome browser and anyone can develop apps for the system, using Adobe Flash if required. Phones with the Android smartphone operating system now occupy second place in the US, behind Blackberry but well ahead of Apple. Above all, the Google brand has immediate consumer recognition.

The Project Canvas partners will need to take a close look at their forecasts during the week ahead. All that’s needed to make Google TV a UK success is broadband to every home in the country.

Step forward Neelie Kroes.