Happy New Year. As 2012 starts to get into the swing on things and CES is upon us once again, I’m looking forward to what will hopefully be a definitive year for IP and TV.
First however, a quick review on how I did with my 2011 predications…
Cord-cutting was proven to be real if not significant in absolute number terms. Netflix has led the charge and J.D. Power predicted 7% of pay-TV subscribers are considering cancelling their service. Catch-up TV has become a mainstream viewing experience – YouGov say 70% of UK – and now appears on television through dedicated apps on connected devices such as Samsung TVs. Social TV is coming on a pace – not just Facebook and Twitter but clever variants like Zeebox, VideoBee and Flingo. YouView struggles on without launching with commentators predicting it will be obsolete before it launches – we will see. IPTV/OTT Hybrids are become established with operators like Verizon, Free and Portugal Telecom embedding Internet-powered apps into their IPTV services. Google continues to move into the TV content space with YouTube live channels, YouTube subscription services, the purchase of Next New Networks and, less successfully, a failed bid for Hulu. Product placement is becoming ubiquitous as legislation relaxes and TV companies struggle for new revenue streams. TV gaming is starting to look mainstream with the rise of Onlive, the success of GameTree and GameLoft on Free, EA’s move into the space and the graphical capabilities on the new processor silicon. OTT is now powering the Independents with more and more content being offered to consumers direct – I particularly liked the independent producers channels on Roku STBs. Lastly, we are seeing the start of a new generation of first and second screen TV players – clearly Google, Apple and Microsoft (Xbox/Kinect) are pushing hard but what about Roku, Amazon, Netflix, Yahoo (IntoNow), Zeebox, GetGlue, Miso, LocalReponse (Philo), Umani, TunerFish, Yap.TV, AioTV et al.
Not a bad set of predictions and a year of good progress for us NextGen TV evangelists. I suppose one thing I did not predict was my departure from Amino following a year of record revenues and profits. The business is in excellent health with a world-beating product portfolio, an excellent global customer base and a dedicated and talented workforce. All in all not a bad time to move on…
What about 2012 though?
1) STB is not going to die just yet….
The first thing to recognise is that the device industry is in turmoil. Motorola sold its STB activities to Google, Cisco is doubting its consumer electronics strategy, Pace is in supply chain hell and all the set-top box players are struggling to convince the market and investors that there is a future in that technology. I suppose I have a unique and, now, unbiased insight into the current state and future prosperity of the global STB market.
For me there are two distinct segments – the low cost ‘pile ‘em high and sell ‘em low’ market and the higher-end, feature-rich propositions. I believe the former will maintain momentum for some time yet. In developing countries, the delivery of broadcast over IP is sufficient to drive sales and for those opportunities cost is everything. That will dictate a $50 price point for HD IPTV STB’s and at that price volume is everything. This market does not require innovative feature and functions but just something that works reliably for long enough. These markets also need a complete eco-system – conditional access, middleware, head-end etc. – and the solution margins here are also becoming increasingly unattractive. So the market exists, there is money to be made but value-chain consolidation and high volumes are the two critical ingredients for success.
The real opportunity for the STB is in delivering innovative solutions to the developed markets such as North America and Europe. Here the swap out cycle for televisions means a consumer who wants new TV features would have to be sufficiently compelled to replace their television or the manufactures will have to wait several years for the natural replacement cycle. This is similar to the DVD player. A number of television manufactures integrated these players into their sets but the majority of consumers bought a separate device – the DVD player and latterly the BluRay player – to get access to these new technologies. The key question is whether the technologies going into today’s connected TV, or the use of a second screen on those TVs, will eliminate the need for consumers to buy a new set-top box. The answer to that question lies in the importance of particular next generation TV features to consumers today and as their needs and wants develop though 2012 and beyond. Getting access to Internet video (OTT video) is pretty much a done deal. Most new TVs, media players or current generation games consoles are capable of playing a variety of video formats and HTML5 will drive some significant standardisation over this year. So if the consumer just wants catch-up TV then the price point for these devices are already set at $99 and trending downwards and I would say well served by the likes of Roku, WD etc. If that consumer wants Social TV as well then the second screen is probably going to win out. I have used a number of the second-screen social TV apps and they are somewhat compelling and do not distract too much from the main screen TV viewing process. Simple gaming is available today but cloud-delivered advanced game play – from the likes of Sony PS3, Xbox, Onlive, GameTree and Gameloft – is set to explode this year and requires a fast STB with strong graphical capabilities to deliver the right experience. Add to this video chat, DLNA capability, an app store, the ability to share and participate and the STB as a media platform starts to look more compelling.
Therefore, I do see a future for the set-top box. Not so much the commodity, single function, low margin IPTV variants of the past but the multi-capable, configurable, home media platforms of the future. These new platforms will allow service providers to devise and deliver many new services that are integrated into their current portfolio of offerings – both telecommunication and cloud-based services. We are seeing new processors from Intel and ARM, which are capable of powering these platforms and the more nimble, innovative and hungry STB providers creating compelling solutions using the new silicon.
2) Service Providers go off-net and retail
The next big battleground for Service Providers is winning the off-net race. For so long, IPTV providers have been shackled to the limits of their own networks when hunting for new customers. Today however, the OTT revolution means that the opportunity to acquire new TV customers has expanded significantly. Telecom Italia pioneered this approach two years ago with their Cubovision platform, which retails in many stores across Italy and works on any broadband connection. 2012 has to be the year when we see more service providers worldwide taking this approach. It offers an intimate, ARPU-generating, TV-based relationship with a customer, consolidates and promotes a providers services on a single platform, eliminates the need for a track-roll on installation and moves the majority of the burden of the STB subsidy onto the consumer. If specified properly, it should also be a platform with longevity that supports emerging services for the next five years. Allowing a competitor to take that space from you is the 2012 nightmare for most of the European and North American service providers.
YouView should lead the charge in the UK for BT and TalkTalk in 2012. Predicted to finally launch this year, this hybrid DVB-T/OTT platform will be offered through retail channels. The question for me is whether this platform has enough capability to be a long lasting platform for these service providers. It would appear that they have chosen cost over longevity and the hardware uses older generation silicon, which will ultimately limit the future innovation of this platform. Free in France has demonstrated this platform strategy with their new Intel-based next-gen STB and are already seeing improved ARPU from compelling services such as gaming. Verizon and Comcast are both expected to launch similar off-net solutions in the US this year so this sector will be hot in 2012.
3) Content portability is now expected
We have been talking about convergence and content portability for a while but I believe consumers are now ready for it and, more importantly, now expect it. TV Everywhere, the Ultraviolet Alliance, HTML5 and the many other cloud-based media services are all going to reinforce that expectation that media is available anytime, anyplace anywhere.
Apple is leading the way with its iDevices plus iTunes plus iCloud approach but expect to see more of Amazon’s and Xbox’s cloud services in 2012.
4) OTT on TV goes mainstream?
So where is TV-based OTT within Roger’s famous Innovation Adoption Lifecycle bell curve? 2011 took us past the Innovators and well into the Early Adopters phase but are we going to see the Early Majority embracing this technology on their TV’s in 2012?
The key barriers are cultural, technological, behavioural and economic. I believe the cultural argument that ‘TV viewing is passive’ is becoming less relevant as the early majority are becoming used to a more interactive relationship with their technology and I cannot see the TV staying independent from this trend. The technology barriers are availability and bandwidth. The availability of hardware OTT services is largely overcome with connected TV’s, games consoles, media adapters and portable devices – certainly enough to take us into the early majority phase. Software services remain a problem as I argue below. The bandwidth conundrum will largely solve itself with the competitive provider markets in the developed countries all knowing that more is more and losing the broadband subs battle is not an option – although the practise of bandwidth capping will increasingly become an aggravation to customers. The behavioural challenge of time-shifting your TV viewing was tackled long ago with VCRs DVRs and DVD players – it is the availability and usability of compelling, mass-market OTT media services that will define the sectors’ 2012 success. I am firmly in the Innovators adoption sector but it has taken an iTunes account, a jail-broken Apple TV2, a NAS server running a Twonky media server, an ability to rip DVDs and a torrent account to deliver a compelling enough OTT TV experience for my wife and family to use regularly. The last barrier is, not surprisingly, economic and the macroclimate in 2012 could easily retard any progress this year. That said, I believe that the only way is OTT and that way will be defined by how mass-market the service and Internet provider solutions become. I still reflect on what Yahoo and AOL did for the mass adoption of the Internet and wonder who is going to do the same for OTT on TV. Yes Samsung are doing a great job aggregating multiple services within a TV App Store environment but that is not for the masses. They need one consistent interface that offers all the content services under ‘one roof’. Much the same goes for Roku and Boxee. This is Apple’s advantage with iTunes and someone needs to emulate for non-Apple devices for things to really take off. Perhaps this will take longer than 2012…
5) 2012 Olympics will be an OTT showcase
One thing is for sure, the 2012 Olympics and BBC will drive mass OTT adoption across multiple devices in multiple countries. OTT was made for an event like this – 50,000 plus hours on content with only 5,000 hours of broadcast capacity available throughout the games. This event may well be enough for consumers to seek out OTT TV devices to access this compelling and time critical content so take note retailers.
All the very best for 2012 to the readers of my blog and, as ever, you comments are warmly welcomed.