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IPTV: Boom or Bust?

Christopher Harz looks into the real potential of IPTV is it a boom waiting to explode or is a fad thats soon to bust?

One of the hottest topics at this years Consumer Electronics Show was IPTV. The reason it may work this time around is the increasing availability of Internet broadband in more than 100 million households worldwide.

One of the hottest topics at this years Consumer Electronics Show was IPTV (Internet Protocol TV or television-over-the-Internet); the National Assoc. of Television Program Executives (NATPE) show similarly had a whole day dedicated to it. A survey by IBM showed that 40% of TV broadcasters felt seriously threatened by IPTV. And hardly a day goes by without a major studio or TV broadcaster announcing a new vice president of digital media, IPTV, new media, or something similar MTV even has a new cdo (chief digital officer) in its Mahogany Row. Why all the excitement? Hasnt this all been tried before, with dismal consequences, in the late 1990s, with dot-com startups such as DEN (Digital Entertainment Network) that later imploded?

Why the Buzz?

The buzz about IPTV appears to stem mainly from three sources: a) independent producers of content who hope they can finally get distribution for their films and TV shows; b) mainline studios and broadcasters who hope they can re-purpose existing content (including old classics that are gathering dust on the shelf) for new media and milk them for additional revenue a general feeding frenzy started with the release of Apples iPod and the success of TV shows sold over the iStore; and, c) non-traditional distribution companies such as telephone companies (telcos), search engines and online content compilers that hope to gain revenues by getting into show biz in some cases, by stealing viewers from traditional content distributors such as cable and satellite broadcast media.

A major reason that IPTV may work this time around is the increasing availability of Internet broadband, in over 100 million households worldwide, which offers a much richer stream than the low-bandwidth dial-up connections that were available in 1999. Whereas many American households still have low-quality broadband (around 300-500 kbps), the 20 or even 100 mbps broadband rates now commonly available in Japan and South Korea are pointing the way to the future.

Modern IPTV can be watched on the big screen in the living room, using a small decoder box as translator between the incoming broadband line and the television monitor.

Whereas the video-over-the-Internet of the 1990s was meant to be watched on desktop PCs, modern IPTV can be watched on the big screen in the living room, using a small decoder box as translator between the incoming broadband line and the television monitor. With increasing broadband speeds and improved compression, it is even possible to send high definition television to homes via telephone lines.

The market for IPTV is predicted to rise very quickly from the modest levels of 2004 to over $44 billion worldwide in 2009, according to a new report by Infonetics Research. This comes as good news for traditional telephone companies, which are being squeezed on the one hand by cellular phone providers, and on the other hand by cable companies and others providing VoIP (Voice-over-IP, the telephone equivalent of IPTV) that can bypass the long distance toll charges that have been bread and butter for the telcos. IPTV offers a much needed new source of revenue, which the telcos hope to bundle with Internet lines and VoIP into a triple play data, phone and television all based on Internet protocol, and all offered as a bundle by your friendly local telephone company.

What is IPTV?

Internet Protocol Television describes a system whereby digital video is delivered to viewers using the Internet protocol over a broadband connection (via either wireline or wireless).

Delivering content over Internet protocol has several advantages. One is interactivity IPTV can be two-way, allowing the viewer to interact with the content to achieve iTV (interactive TV) features such as commenting on the show, choosing winning contestants, or buying merchandise worn by the actors. Another is convergence using Internet protocol for many different types of content (including voice/telephone, data and video) allows it all to be delivered using the same digital language, so to speak, over one basic channel, which tends to be much more efficient than using the old analog means still commonly used for media such as radio or telephone. A third is availability using the Internet, content could be made available to worldwide audiences, without the limitations to distribution posed by sending video content over the limited number of channels available on conventional TV networks, cable or satellite.

The basic physical components of an IPTV service are: the video head end, where the video is captured and processed so it can be sent over the network; the service provider core network, which is the long distance backbone over which the IP-based content is sent; the service provider access network, which is the line from the last node of the service provider to the customers house (which can be DSL or fiber to the home); and, the home network, which is the connection between the broadband line coming into the home and the content storage and displays, displays normally consist of either a computer screen or a television set (which is usually accessed via a set top box, or STB).

A closed system (or walled garden), where one service provider such as Verizon or Warner Cable controls all the junctions (nodes), is the preferred means of delivery for realtime IPTV, so that the service provider can more easily monitor quality and collect payments. The disadvantage to a walled garden is that if you are not living in the companys service area, you cannot become a subscriber.

Delivering content over Internet protocol has several advantages: interactivity, convergence and availability.

DRM, Ads and Billing

Digital rights management (DRM) is an area of major paranoia for the major studios. Owners of video content are afraid that they will become the victims of widespread illegal copying, as has been the case with music content owners. Various methods of copyright protection are being tried, including allowing the content to be played only on a certain platform, such as a video iPod (for Apple) or on a PC (for Google). Ad insertion for free content is a rapidly evolving science the intention is to insert ads that are customized for the viewer, such as ads from local merchants. Billing is also becoming both an art and a science its easy to charge $1.99 for a TV show, for instance, but how much do you charge for short video clips or screen savers from such a show? And how much do you charge for rental (for a day, or three days, or a week) as opposed to ownership? Different venues are trying different models. Apple, for instance, likes to keep to a $1.99 price per download when pieces of content are short, it may bundle them to come up with a package, which is what it does with Pixar shorts such as Tin Toy and Geris Game. Google, on the other hand, charges different prices for different pieces of content, and lets independent owners set their own prices (from which Google gets a percentage).

Watching Now or Later

IPTV can be delivered in two basic ways realtime (also called live or streaming) or non-realtime (also called store-and-forward). Realtime video is available from companies such as MediaZone or Fashion TV, which allow you to either buy content or watch it for free (with associated advertising). Showing content realtime is the normal means of delivery for mobile devices such as cell phones which, however, do not yet use Internet protocol (more on this later). Realtime video can either be scheduled (at a particular time, like regular TV shows are) or may be available exactly when the viewer wants them (this is called VOD, or video on demand).

Scheduled video is much cheaper to deliver, because it can take advantage of a technique called multicast, where one video stream is sent out from the head end and is then copied (or mirrored) near the viewing households this is analogous to sending one letter out from New York to Los Angeles, and having it photocopied a million times when it hits the L.A. area. VOD is much more expensive, because it has to be sent uniquely for each viewer, a technique called unicasting, which is analogous to having to send a million letters from New York to L.A., one for each viewer.

Multicasting is at present very difficult to do over the existing worldwide Internet (which was not really designed for this when it was designed some 30 years ago), and is generally limited to walled gardens, where one company controls all the nodes of the network. This will change with the introduction (in the 2007/2008 time frame) of the New Internet (also called Internet Protocol version 6), a massive upgrade to the present Internet, which was designed for enabling multicasting on a global basis.

Store-and-forward is currently the most popular form of delivery for IPTV, with venues such as Apples iStore, CinemaNow, iWatch-Now (which has older content such as The Jack Benny Show and The Lone Ranger), and Google, offering thousands of TV episodes, music videos, films, games, video blogs and video clips, either for rent (where there is a limitation as to where and for how long the content can be watched) or to own.

How Do You Find IPTV?

Whether IPTV is being sent realtime or downloaded for later watching, being able to actually find desired content remains a major problem. Whereas venues such as Google Video let viewers search by category or name, and provide helpful thumbnails of the videos, you can tell that video search engines are still in their infancy. Discovery of content was described as a major IPTV problem by many of the executives at the recent NATPE show.

Not being able to find content also translates into fewer eyeballs watching a particular show, which affects revenues, whether by advertising, subscription, or PPV (pay-per-view). Mainstream TV shows can generally count on millions of viewers, a necessity when advertising spending is on a CPM (cost per thousand impressions) basis. Internet ad rates in the $5-$10 CPM range dont go very far if there are only 10,000 viewers for a piece of content. New business models and new means of promotion are necessary for IPTV-based content that does not have a major brand name such as ABCs Desperate Housewives to attach to. Animated content may have a real advantage in this area. Whereas producers of live films and videos are only beginning to think of derivative content, product insertion and other creative cross promotional tools for shows, animated TV shows have already been doing this for a long time, according to Andy Heyward, the ceo of DIC Ent.

Animated content has an advantage in its promotion on IPTV, according to DICs Andy Heyward. Animated TV shows already focus on creative cross-promotional tools, while live-action producers are playing catch up.

How Can You Get Into IPTV?

Understanding the IPTV market can be daunting, simply because there are so many new players in it, and many such as the telcos are unfamiliar with entertainment content or what to pay for it.

One obvious group to pitch with new content is the major studios 20th Century Fox (Fox TV), Paramount (Viacom, MTV, DreamWorks), Sony (Columbia Pictures, Tristar, MGM), NBC (Universal), Warner Bros, New Line Cinema and even Disney (ABC, Buena Vista, Hollywood Pictures, Touchstone), all of whom have started new media divisions that being new and possibly naive might be easier to access than the old media headquarters are. They are looking for short comedy clips and other abbreviated content to put onto the Internet. They are also generating additional content to augment their regular shows for online fansites. These short stories wrapped around branded shows are often called webisodes.

By the way, a major study on mobile TV in the U.K. by Aqriva-O2 refutes the conventional wisdom that most new media content should be very short, perhaps 3-5 minutes long. Some 375 viewers in Oxford viewed mobile TV for an average of 23 minutes once or twice a day, for a total of about three hours per week. Viewers were not especially drawn to super-short segments. Again, although the conventional wisdom predicted that mobile content would only be viewed away from home (while waiting in line, or on a bus), much of the viewing via the handheld sets was inside the users homes. (They may have preferred watching a handheld with programming. of their choice to having to fight over the remote control for the family TV.)

Googles Larry Page promises that its new search engine Google Video allows viewers to search, browse and watch high quality video quickly. © 2005 CEA. All rights reserved.

New video search engines such as Google Video are now also netcasters, which will accept your video and let you set the price you want to charge, and will also let you decide whether to limit or freely release the viewers access to your content. Google video will let you watch lots of high quality video on the web for the first time. You can search and browse, and we make it fast and easy for you to watch, said Larry Page, Googles co-founder/president, at the 2006 CES. Google Video lists cartoon classics from Classic Media such as Felix the Cat, Casper the Friendly Ghost, and Rocky and Bullwinkle.

Google Video partners to provide content include CBS, Sony BMG (for music videos), Greencine.com (for feature length independent films), Clearview, CareTALK, Fashion TV, Here! TV, HDNet, Hilarious Picks, Image Ent., iWatchNow.com, Kantola Prods., MediaZone, Plum TV, PorchLight Ent., SOFA Ent., Teen Kids, Trinity Broadcasting Network, WGBH, Wheels TV and Wilderness Film India Ltd.

Many other companies are looking for content. An innovative startup that focuses on online video is Truveo, recently acquired by AOL, which is planning a strong online video presence. Apple is under pressure to increase the number of offering in its online store. Sony has announced an upgraded version of its Sony Connect online store to purchase TV shows and videos, but many expect Sony to be held back by its sometimes Draconian anti-copy-protection initiatives.

Google Video partners with many content providers, including Classic Media, which owns such shows as Casper the Friendly Ghost (left) and Felix the Cat. © Harvey Ent. (left) and © Felix the Cat Prods.

Clear Channel recently announced that it will provide online access to thousands of music videos, and is motivated to expand its Internet presence. 4Flix.Net offers content at $1.99, similar to Apple, but is more open regarding DRM, and has some short clips for free. Blinkx is also developing a compilation of content, including some free short films. iWatchNow is expanding its programming, which up to now has consisted of golden oldies. TrueLight Ent., a company with extensive animation experience, is making a major move into the IPTV area.

There are also many smaller players, often targeting niche markets. These include such portals and producers as JibJab (political satire), The Players Network (poker and other card games), BlueHighways TV, Fashion TV, Here! TV, iWatch-Now, PorchLight Ent., Trinity Broadcasting Network (and other religious broadcasters) and Wilderness Film India (and other broadcasters from countries with large immigrant populations in the U.S.).

Animated content from many sources is expected to be in high demand, not only because it is often easier to transmit and view than is live content (especially on small handheld screens), but because it can cross borders so well animated content can be viewed and enjoyed in countries and cultures that might be totally befuddled (or shocked) by Desperate Housewives. Customizing animated content for the global market is also simple, and often just requires dubbing in new voices in the local language.

There are many smaller producers who target niche markets like The Players Network for poker and other card games.

New Players in Show Biz

Start following some of the major new players in the IPTV field, and watch what moves they make in the months ahead. Some of these moves will only make sense in the context of the expected large market size of IPTV. Cisco, for instance, a dyed-in-the-wool IT infrastructure company, recently bought Scientific Atlanta, a set top box maker, and is now suddenly in show biz.

The largest IPTV operators until recently have been: NOW Broadband TV in Hong Kong, Fastweb in Italy, France Telecom, Media on Demand in the Republic of China, Imagenio/Telefonica in Spain, Yahoo! BB in Japan, and Homechoice in the U.K. Major operators in the U.S. in the near future will include SBC/AT&T (which paid Microsoft a reputed $400 million for IPTV software) and other telephone and cable companies, as well as search engine providers such as Google and Yahoo.

Major support companies for IPTV will include Broadstream Communications, Microsoft, Intel, Advanced Digital Broadcast and Motorola (which make set top boxes), VBrick Systems, Alcatel, Ericsson and Siemens.

Future Technology

One of the factors that will boost IPTV will be its availability on mobile devices. Certain handhelds such as the Sony PSP Playstation Portable can already accept broadband, since they have built-in Wi-Fi (802.11) capability. However, cell phones have not been able to directly access the Internet via WiFi broadband, which has led to cellular providers such as Cingular being able to almost totally control the content on the cell phones of their subscribers.

All that is about to change. New hybrid phones such as the Motorola MPx and the UT Starcom GF200 can detect and use WiFi Internet connectivity in addition to regular cell phone service such as GSM. You could use such a phone to make regular cellular calls in areas without WiFi, and it could then switch over to WiFi as soon as you got close to your favorite Starbucks Coffee (or your home) letting you watch IPTV shows via your handheld directly from the Internet. Handset makers Motorola, Ericsson and 11 other wireless firms have joined forces to make Wi-Fi phones more affordable, mostly by developing a standard known as Unlicensed Mobile Access (UMA), which lets phones automatically switch between cell and Wi-Fi networks. As soon as all cellular phones have the ability to receive WiFi (or its likely successor, WiMax/WiBro), IPTV will get another billion platforms on which to show content.

One of the factors that will boost IPTV will be its availability on mobile devices. The Sony PSP PlayStation Portable can already accept broadband, since it has built-in Wi-Fi (802.11) capability. © SCEA.

Another major technology development affecting IPTV will be the worldwide deployment of the New Internet, IPv6. This massive upgrade to the existing Internet Protocol (IP version 4, in use since 1973) was designed for easier, cheaper and more secure transport of multimedia. Its adoption will greatly facilitate greater quality control of video streams (by checking end-to-end delivery and by a new type of traffic routing), will reduce costs (by introducting effective multicasting), and will greatly enhance mobile user IPTV reception (by assigning permanent IP addresses to each and every mobile device, with transparent roaming). The New Internet is the preferred protocol for the upcoming Vista Operating System (Microsofts replacement for Windows XP), which offers many new features only available with IPv6.

Summary

You can expect events such as NATPE, NAB and other entertainment content-related trade shows to be very different in the coming years, with booths from Microsoft, Intel, ATT and Google right next to those of NBC, Sony and Disney. Contracts for the release of rights to content will get longer and longer in the days ahead, and entertainment lawyers will all get brand new Porsches every year. Content sent over the Internet will initially consist of repeats of branded shows as well as short-form niche entertainment such as comedy clips, sports, poker, music videos and weather, but will evolve into longer-form TV shows and films as soon as some of the transmission bugs get worked out.

This will enable a new age of opportunity for independent producers, who may be able to bypass the constricting and often tyrannical rule of todays major distributors (including film and broadcast studios). Such producers will however need new types of creative promotion (including guerilla marketing) to get their wares recognized and accessed by a widely dispersed public looking at an ocean of new video content.

Christopher Harz is an executive consultant for new media. He has produced videogames for films such as Spawn, The Fifth Element, Titanic and Lost in Space. As Perceptronics svp of program development, Harz helped build the first massively multiplayer online game worlds, including the $240 million 3-D SIMNET. He worked on C3I, combat robots and war gaming at the RAND Corp., the military think tank.