So time to reflect on where we have got to and where we could be going. Let’s start with a sense of where we are now. According to Cisco research, digital TV in 2011 was being viewed by 694 million people and this will grow to 1.3 billion in 2016. In 2011, tablets were the fastest growing business device/connection category with 19 million and in 2016, there will be a massive 92 million of them.  So over five years we will see a doubling of digital TV users and the population of tablets growing almost five fold.

According to TDG’s latest research, 70% of connected TV owners use the platform to watch long-form over-the-top video content, on average 11.8 hours per week. At least once during that week:

• 48% of smartphone users watch short video clips;
• 26% of smartphone users stream TV shows from free sources like Hulu
• 25% of smartphone users stream TV shows from subscription services like Netflix or Hulu Plus; and
• 20% of smartphone users stream TV shows from pay-to-view services like iTunes or CinemaNow.

Among 18-49s that use their pads to watch online TV programs (a key TV demographic), 39% report that their pad viewing has led to an increase in regular TV viewing suggesting that those devices have an ability to influence TV viewing. Otherwise, 46% report no change and 15% report a decrease in regular TV viewing. Even among 50+ users, the net impact is close to zero.

For the second straight year Nielsen’s updated count of the number of US TV households for the 2012-13 season declined to 114.2 million, down from 114.7 million for the previous season. The 2011-2012 numbers also indicated a drop from 115.9 million households for the 2010-11 season – a two-year decline of 1.5%.  This is unsurprising given US unemployment rate of 7.8% – but the takeaway is that is fairly stable despite the potential upheaval of OTT.

Social media continues to grow at a pace with 62% of adults worldwide use social media. Social networking is most popular online activity, with 22% of time online spent on channels like Facebook, Twitter and Pinterest. According to Mark Zuckerberg, Facebook now has one billion active users, become friends with one another 140.3 billion times, uploaded 219 billion pictures and awarded 1.13 trillion ‘likes’.  Twitter has over 100 million active users of which around a half log in at least once a day.  42% of Americans surf the web on their PC, tablet or mobile phone whilst watching television.

Looking at TV advertising, Kantar Media reports first Q4 advertising spend slowdown since 2009 and 0.8% growth in 2011, 1.8% in 2012. Political advertising may however be distorting these revenues. Interestingly all forms of ad spend are down – except TV in the US from 2011-12.

Let’s attempt to boil these statistics down to some simple facts:

• TV continues to go digital and connected
• A massive number of new video viewing devices now exist
• However, TV viewing hours have pretty much gone unchanged
• The use of social media has exploded
• Advertising spend on TV is pretty much level

If everything is going to stay pretty much unchanged then what is all the fuss about? Well the fuss is not so much whether the TV remains the device of choice for watching video but how that video watching continues to be monetised by both the incumbents and the innovative second-screen pretenders.  The DVR recording of content has already limited the value of broadcast advertising.  The industry has tried to convince themselves that 30x fast-forwarding ads still relay the core messaging but common sense suggests otherwise.  The threat today though is far more wide reaching – the use of the second screen to commercialise broadcast TV without entering into any commercial agreement with the originators of that content.  The halo effect of content associated with a broadcasted channel without their control or permission can be viewed as the positive result of democratization or another example of piracy depending on which side of the fence you sit.

Assault number one is coming from the programme enhancement applications such as Zeebox, Flingo, IntoNow and TV Tak.  These technologies either synchronise with the broadcast stream through technology or rely on the consumer to select the desired programme.  They then proceed to add value to the broadcast by delivering additional information, bespoke programming, related twitter feeds, enhanced sponsorship messaging, coupon distribution and product placement. Granted these companies are currently working with, as opposed to against, the broadcasters to deliver their solutions but the long-awaited transition from TV viewers to TV customers is being achieved outside the control of the traditional free-to-air broadcasters.

Amazon has already embraced this new channel by approaching producers of comedy and TV shows to create programming for online streaming and tablets in return for a $55,000 upfront payment and a portion of revenue from toys and T-shirts.

Zeebox is launching its viewing companion application in the United States in partnership with Comcast Cable, NBCUniversal and HBO. It enables users to find programmes through enhanced listings with personalised social recommendations and promises to enhance viewing with further contextually relevant information about programmes. In the UK, Zeebox has partnered with interactive TV platform ShowCaster to launch an unendorsed second-screen TV show that will provide commentary and interactivity options for viewers watching X Factor on their main television.

Assault number two is coming from social TV ‘check-in’ services like Miso, Viggle and GetGlue that allow viewers to use their mobile device to tell friends which TV shows they are watching. Miso has built a SideShow application to help networks and viewers create and share their own multimedia projects for following along with TV shows.  GetGlue and Viggle both offer discounts and perks for people who check in with specific shows. Social media monitoring company Networked Insights found that media agencies are improving efficiency in their TV buys by 5% to 12% when they consider the social media ripple effect surrounding a TV show.  If a proportion of this ripple effect can be attributed to the Social TV second screen applications then they begin to influence a significant part of the marketers TV advertising budget.

However, it is early days for all these applications and actually usage volumes are low compared to the hype they are commanding but they are delivering off-broadcast value to a generation that feel little loyalty to the big networks.  This generation trusts their social networks much more than they do the big brands and so the influence from the second screen applications could be proportionately higher than their current usage suggests.

So the big ‘TV’ change for me is where the influence is moving from and to.  Back in the 1950s, entire programmes were funded by a single sponsor and messaging benefited from the halo effect of the content.  Tomorrow, that halo effect could be generated by brand advocates using social media alongside the viewing experience.  Those advocates will literally become priceless to brands looking to influence the social media generation and the detection and fostering of them will be a key part of the new Social TV (sTV) applications. In future, the problem of getting TV ad messaging to resonate may not be one of targeting or focus as second screen can render them essentially invisible. Therefore moving that messaging to within the distracting mechanism has to be a compelling solution. Until this happens, TV ads will continue to under-perform for the Y & Z generations and their value will deteriorate regardless of how creatively brilliant they are. Broadcasters may attempt to acquire the second-screen disrupters but the core appeal of the successful social media sites tend reflect values of independence, personality and subversiveness – something it soon loses when owned by big corporates as we have seen with MySpace and Friends Reunited.

Televisions are going to remain the screen of choice for viewing video content; OTT content will increasingly act as an alternative TV channel delivering more of that video content; second screens will be used to watch video on the move and away from the main TV; but it is the influential effect of second screen applications that could change TV economics forever.  This influence on what programmes to watch, what advertising messages to believe and what products to buy will be the television monetisation battleground of the future.  Therefore, we stop worrying about who is watching what and when but who is influencing who and through what channels. Then the links in the television economic value-chain of the future will be become a lot clearer.

Throughout the history of television, the intelligentsia have spent many hours debating the influence TV has exerted on society but, in my mind, the future debate will be quantifying the influence second-screen social media will have on the shape of television.

Well the rash of new HDMI sticks have the real potential to do just that.  Powered almost universally by ARM Cortex CPUs and Android 4.0 operating system, they simply plug into a spare MHL-enabled HDMI socket in the back of a flat screen TV and connect through Wi-Fi to the cloud.  That cloud delivers storage – no need for bulky DVR/PVRs anymore.   That cloud delivers applications onto an industry standard stack  – no need for the fat software solutions so cherished by Microsoft and others.  That cloud delivers HMTL5 encoded content – offering access to a massive amount of content without re-encoding.  That cloud connects to other devices – bringing the second screen experience to control and enhance that content.  Lastly that cloud does not care where you are – you can unplug your stick, carry in your pocket and connect to any TV to enjoy your own personalised experience.  The latest media adapters are also 3/4G enabled making then even more portable and looking suspiciously like a mobile phone.

For me tomorrow’s set-top box is more musician than conductor – enabling individual TV devices to play the Internet cloud. So will today’s cumbersome set-top boxes look as ancient tomorrow as the old Bush Bakelite TVs do to us today? Or will they take on the more important role of media conductor within the home?

The answer I suspect is yes and yes.  From a physical perspective, most large set-top boxes today are that size because of lazy design, over-hot silicon, large mechanical disk storage and poor heat dissipation.  Also most are manufactured for the service provider market who traditionally think cost over consumer need.  Apple TV and Roku have bucked this trend and created ‘pucks’ with simple remote controls, attractive interfaces and striking designs.  However, they still need a power and HDMI lead at a minimum and – despite the set-top box classification – generally sit under TV sets that are commonly hung on walls.  With the HDMI stick connected by Wi-Fi to the cloud there are no unsightly wires, no need for an equipment shelf and it can be easily moved from TV set to TV set.  Early pioneers of the HDMI stick have already created appealing solutions like Equiso, Pocket TV and Enjoy TV but Roku is now mainstreaming the technology with their stick aimed firmly at the mass retail markets – helped no doubt by BSkyB’s recent investment in the company.  You can now go as far as a full functioning MK802 Android-based PC using the ARM-based AllWinner A10 CPU and retailing at circa $70 in US.  Looking even further forward, expect the next generation of media adapters to disappear into the wall and become part of the standard wiring system in new builds.

But the poor old STB is also being attacked from many other quarters.  First the Connected TVs are offering increasing levels of interactivity whilst secondary devices are now ‘throwing’ their content on the big screen using Airplay, Allshare, Smart Share, Vieralink, Twonkey, Plex, Seviio, iMediaShare, WiFi Direct et al.  Apple’s new operating system Mountain Lion now allows MAC screen mirroring onto the TV via an Apple TV device but you do need sufficient horsepower in the PC to pull it off.  Game consoles are becoming more connected and sophisticated than ever before with Microsoft’s new SmartGlass trying to breed even greater longevity into the Xbox.

The financial markets scepticism is reflected in the sectors’ valuations but interestingly Pace (LSE: PIC) is currently showing signs of recovery after a rocky period.  Smart device manufactures are looking to software and the cloud, rather than hardware, for their longevity.  Cisco buying NDS is a case in point but it will be interesting to see who is willing to bid for Motorola Home once Google finally decides to dispose of that unwanted sibling.

So can the humble set-top box fight back?  Certainly the long-tail market effect means that we will still see large metal boxes perforated with many holes being supplied to consumers of PayTV services for a while yet.  But how and when will this change in the future?  Quality content will always attract a premium and regular TV subscription revenues require a critical mass of such content to be justified.  Enjoying that content through multiple devices is a value-added feature that is now central to most PayTV operators strategy (TV Everywhere, Sky Now, HBO Go etc). The cloud has enabled that important multi-device delivery but at the same time severely weakened the traditional distribution advantage of the PayTV operator.  Telcos are working hard to emulate the economics of terrestrial/satellite distribution through broadband and will eventual get somewhere close.  The move to significant levels of time-shifted viewing has weakened the value of mass, simultaneous broadcast capabilities.  So if the content line-up is weak then owning the distribution no longer acts as a safety net.  Today, the war is firmly around securing, protecting and monetising quality content.  This is great for the consumer as previously PayTV operators would lazily fill their day time viewing with grass growing / paint drying fodder just to secure the advertising revenues – that is fast becoming a thing of the past.  The set-top box was linked strongly to protecting and exploiting that distribution network but consumers are realising that the box is no longer essential to discover and view content and that is where the traditional set-top box is in trouble.  With ubiquity of content distribution came a plethora of alternative, consumer-friendly devices which have put the PayTV operators to shame.  It is hard to beat cost, simplicity, miniaturisation and energy efficiency as the main market CPE drivers into the future. Expect to see to PayTV operators having a diminishing reliance on the hardware, a sustained reliance of content protection technologies but an ever increasing focus on securing the best content.  The set-top box no longer holds the preeminent place in the centre of a PayTVs monetisation strategy and the saved CAPX on equipment and truck rolls can go towards more quality content acquisition.  I do believe that content owner / creators can exploit the alternative OTT direct channel and have limited success but this will not match the existing gravitas of the PayTV subscriber bases nor be able to match the marketing dollars spent to maintain and grow those subscribers.  Sport content owners, of course, do have the power to hurt PayTV operators if they independently offered unbundled, direct, live events but that unholy alliance has yet to be broken.

Looking to developing markets can be a good indicator – there technologies can leapfrog generations, like in Africa where landlines were abandoned for mobiles for calls, and PCs were leapfrogged by mobiles for banking. Why would an emerging market pay for a traditional standard set-top box when they could just jump to a $30 media adapter and alter their delivery mechanism accordingly?

Having had first hand experience in running and growing a traditional set-top box company, I believe the answer is to offer compelling solutions that excel in harmonising the customer experience as a whole and not just supplying the software or hardware elements.  Our industry must avoid reinvention but apply its expertise where it can make a real market difference and leave the rest to the market.  This means adopting industry standards, choosing a ubiquitous operating system powered by fast plus cool plus small silicon, connecting to common cloud-based services and applications and becoming experts in the stitching together and delivering the complete solution.  That solution will increasingly become a home’s entertainment hub and provide a ‘home cloud’ source for the many and varied connected devices in the home.   In future, these secure, multi-capable, configurable, home media platforms will complement, not compete, with the many alternative set-top box offerings available today and act as a trusted distribution channel for the PayTV operator’s content.

This corralling of disparate devices and media sources using the increasingly common adoption of industry standards like hbb.TV, DLNA Premium Video and HTML5 will add real value to service providers and their customers world-wide.  The answer is ‘don’t fight ‘em – integrate ‘em’. Apple, of course, has this vision down cold but do so using proprietary standards that do their best to exclude non-Apple devices from the party.  What the market needs are solutions that offers the same unifying effect, the same consistent user experience, the same interoperability but without the Apple price tag. Too big a vision?  Maybe but if the industry creates such a non-proprietary eco-system then the sum could for once be much, much greater than the parts.

Google could be the centre of gravity for such an initiative; they have the money, software components, advertising revenues and the intent but they would have to learn to share more.  Service providers are under pressure as subscriber levels are saturating and ARPUs are falling, their current set-top box ecosystems do not foster innovation. Tomorrow’s key consumer success factor will be agility and speed to market with regular new experiences. That agility will only come through partnerships and the industry working together as a whole. Switching costs are falling as more and more devices are standardising and most legacy devices are capable of handling at least some of those standards.

Our core value as an industry lies in our reputation within the customer base – they need and trust us to deliver and support their TV visions – not continually reinventing them.  Happily there is significant market value to be had in doing just that.

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.

We have been aware of Google’s interest in Motorola’s patent portfolio for a while. Over 17,000 of them (plus 7,500 pending) and I’m sure these will offer decent ammunition in their Apple/Microsoft/Oracle war. The question for me is whether Google actually wants the rest of Motorola Mobility’s assets or they just come as a consequence of the patent portfolio. So let’s argue that this cash-only deal is also about acquiring Moto’s manufacturing, hardware and software capabilities and Google doesn’t just flip them to restore their cash balance back towards the mid-thirty billions of dollars.

As you would imagine, I’m going to focus on Moto’s Video Solutions activities and not on the mobility side. Let’s first define those assets. Most significant is the video infrastructure equipment and the broadband, convergence, data, voice and video CPE. Their IPTV set-top boxes power a significant number of Tier 1 Microsoft Mediaroom initiatives worldwide – including at&t – and their hybrid STBs support both Comcast and Verizon’s TV activities. There are the various solutions acquisitions like Securemedia (conditional access), Bitband (video server technology), Dreampark (middleware) and not forgetting Google’s earlier acquisition of Widevine (conditional access). So at first glance a pretty compelling IPTV solutions portfolio but all are sub-scale niche solutions compared to Google’s significant reach. Google has tried to enter the consumer set-top box market previously with the ill-fated Sony and Logitech powered GoogleTV solutions. Both failed to excite the market after the major networks (ABC, CBS, NBC) blocked their content and the rest of the functionality was not compelling or usable enough – leaving Sony mad and Gerald Quindlen (Logitech CEO) out of a job. It also put the TV service providers on notice that Google is after those early adopter cord-cutters in an attempt to start its push to dominate TV advertising and embed Android across all devices.

Apple is the aspired model – a retail device manufacturer that has expanded successfully into becoming the defacto standard for content retailing online with iTunes and has vertically integrated with an SoC manufacturer (PA Semi) to control most of its hardware operations dependencies and create its own unique hardware platform. Google, synonymous with search and destroying all competition in its wake, has expanded firstly into mobile internet – inventing the Android operating system on its way. It has moved into content protection with the acquisition of Widevine and now is a device manufacturer (mobile and TV) with the Motorola acquisition. Both have the infrastructure end to end to distribute OTT but neither generates any content themselves. Buying a network would be the obvious next move for either Google or Apple, but will the SEC allow Google now they have acquired Motorola? Remember Comcast was forced to divest all control of Hulu when it acquired NBC to prevent an entertainment monopoly emerging and this deal may prevent Google from pursuing that path.

However, Larry Page in already setting his stall out in his blog – “With the transition to Internet Protocol, we are excited to work together with Motorola and the industry to support our partners and cooperate with them to accelerate innovation in this space.” But it is the control of the living room that is really jazzing this strategic heavyweight. And he must break some hearts to get there. Most OEMs (Cisco, Pace, Sagem etc) will now view Google as moving from partner to competitor but that may not be a great problem for Google. Google’s influence extends to the consumer themselves and the latest set-top box technology will allow those consumers to choose whether they want to use Google’s multitude of services and not worry about the OEM’s support or otherwise. The more difficult relationship to square will be Motorola’s service provider customers. They are not sure whether Google is friend or foe and this acquisition will only accelerate the need to make that call. Google will quickly start to embed Android and their services into their living room technology and I would expect a more compelling GoogleTV 2.0 to hit high street stores fairly soon. So does a customer like Comcast continue to use a technology supplier that is set to compete with them in retail? Sitting in Google’s shoes, I would set my priorities as emulating and beating the Apple, n-screen, end-to-end model first and worrying about placating the existing Motorola customers a distant second. At the same time, Motorola’s current customers are struggling to settle on their own OTT strategy and are fully aware that this innovation giant is both fleet of foot and frighteningly well resourced. Where is their safe haven now? Apple – no too proprietary, Microsoft – no too closed and inflexible, Samsung/LG/Sony – maybe but too limited in distribution and capability, Open Standards – almost certainly and strive for ubiquitous distribution (the little and often approach on multiple screens). HTML5 is a clear opportunity here on top of a Linux base and leverage the power of the cloud to compete against the would-be dominators.

I know that a good broadcast infrastructure (cable, satellite, digital terrestrial) will defend the TV service provider’s position for a good while to come. The challenge though is where those same customers go for their OTT ‘fix’. A revised GoogleTV solution could be a classic ‘cuckoo’s egg’ – planted in the home to offer an Internet video value-add but over time becomes the dominantly viewed device that pushes out the incumbent PayTV solution from the living room. This could be accelerated if Google’s live broadcast trials go mainstream and go ballistic if they are successful in buying Hulu!

So will PayTV play the OTT game, go for an open multi-device approach, discover the right business models and deliver exciting solutions and services to their customers? Or will we all be subscribing to Gogglerola services in the future and hailing Larry Page as the new Rupert Murdoch – minus the phone hacking of course…..

Do you talk about the technology? About the content? Reference a website your companion might already use? Enthuse about applications, widgets, catch-up TV, music, search, recommendations, on demand games, social media, UGC/PGC or home media hubs? Let’s face it, most of us will need to be riding up the Empire State Building to deliver even a semi-coherent description of the power of OTT and still wouldn’t have critiqued the choice of devices that can handle OTT.

In my view, it is the challenge of defining OTT consistently to consumers that will either make or break its commercial success. Not the device technology, not the content, not the licensing issue, not the network capacity, not the standards but the ability to define and deliver against a mass market expectation of OTT.

I do applaud Youview’s attempt to brand a common hybrid/OTT experience in the UK market but of course it is failing to actually launch anything to cement that experience in the consumers mind. Similarly, a number of pundits are using Smart TV as a descriptor but that is being used to refer to TVs, set-top boxes, tablets and mobile phones. The user experience also spans a simple widget on an early TV through to a powerful media centre acting as a hub to play all possible types of media from all possible media sources.

Or do we define OTT not in terms of features and functions but as an experience, a religion, an aspiration, freedom, liberty, empowerment, rebellion, and self-realisation? A grander mission to break the control of our archaic TV providers and establish a new libertarian regime of information and entertainment from all to all? Lovely idea and sometimes I do think we are defining a new world order but I would suspect that the masses aren’t feeling overly repressed by their current TV service!

Let me proffer a solution to this conundrum. First of all we are simply offering enhanced TV. Just like DVR, HD and 3D. Second we should focus on the most valuable enhancement OTT can offer and that must be catch-up TV. Third we should think the best ‘televisual’ way of presenting that enhancement to customers which has to be the backward EPG. So for me, OTT is about presenting broadcast content from the cloud in the most customer friendly way. From that functional ‘anchor’, we can then add all of the wonderful enhancements that an internet connection can deliver. But these are just marketing noise. Noise that has the potential to confuse, distract and deflect. Let the history books define the evolution of TV to be analogue to video recorders to digital to DVR to high definition to 3D to catch-up TV. It is a branding that does what it says on the tin, one that people can immediately see value in and one that does not contain three letter acronyms! Well done Virgin Media who are doing exactly that with these next gen TiVo units. From a purest point of view, not that latest technology, not the most comprehensive feature set but a proper, usable, customer-friendly backward EPG.

I’m not saying that the backward EPG must solely reside on the television or set-top box. It could equally be on a second screen with content ‘thrown’ onto the TV. It doesn’t have to appear as a grid (sorry Rovi) or be two dimensional as the vast majority are today. It can be contextual and linked to the related long tail content. It could spawn apps that are synchronised with the content being watched. It could contain recommendations from family and friends on what to watch. But most of all it takes a consistent, editorialised and embedded paradigm and enhances that with OTT-powered catch-up TV content. That is what will excite the masses to spend their hard-earned cash on OTT-powered features. That is what our industry can hang lots of innovative new services on. That is what providers should embrace to retain and grow their customer base. And that is what I could easily describe in the few floors I have left in my journey in that metaphorical lift.

Is that what you think? As always, let me know…..

1) Cord-cutting is real and Over-The-Top (OTT) is the scissors

2010 has all been about debating whether cord-cutting is real.  Media dinosaurs doing ostrich impressions by arguing that customers are just moving between Pay TV providers as opposed to abandoning them.  Paradoxically, the networks are working hard to drive direct customer relationships through their PC services whilst working equally hard to deny those same consumers that experience on TV.  Well in 2011 the debate will stop and the TV business solutions will start.  Pay TV providers will start to enhance their solutions with OTT services by either replacing their existing STBs or enhancing them through a companion box.  Then the fight will be to effectively monetise but as always that will be about delivering an exclusive experience (content, applications, communications etc) and it is that respect our industry has an exceptional opportunity.

2) Catch-up is the new Broadcast

A number of industry pundits believe that catch-up TV viewing will never become more that circa 15% of TV viewing.  I would argue strongly that the limiter here is not customer desire (just look at iPlayer and Hulu) but availability of this experience on TV.  If Virgin’s TiVo and BBC’s Youview in the UK do deliver true forward and backward EPGs in 2011 then we will start to see the true appetite for on-demand versus broadcast viewing.  My guess is that the ratio will settle at more like 60:40 in favour of broadcast and this year will start to indicate whether I’m right. The icing on the cake will be when OTT is a viable distribution method for live – ‘appointment to view’ – event programming that may have previously been only available on broadcast. This is evidenced by Google’s YouTube live TV trials and also other media companies experimenting with delivering multicast services over-the-top without the need for a managed network. If it works it’s going to be really significant.

3) Social TV goes IP

Television has been powered by the social interaction for years – think X-Factor.  With millions voting through their phones we will start to see TV technology being able to substitute the phone and start to allow programming to leverage this new medium.  Until now, there has not been enough technology to justify producing specific content but with new STBs, connected TVs and synchronised handheld devices I can see the start of new formats.  Similarly, social recommendation through the TV device will start to power viewing habits where the editorialisation will come from both the network and from friends and family.

4) YouView is all TalkTalk

Here in the UK, I predict that YouView will continue to attract more media coverage than customers for at least the first half of 2011.  However, if we do see a launch this year, I would suggest that the powerhouse behind the mass adoption will be TalkTalk who are true retailers and unencumbered by existing TV solutions.  Of course, BBC will help by delivering free advertising on television as they did for Freeview but YouView will need an aggressive service provider to subsidise and technically support adoption if YouView will make a difference in 2011.

5) IPTV/OTT is the new Hybrid

OTT may be the new IPTV but the true killer combination is a mix of both.  IPTV to deliver consistent broadcast and quality on-demand complemented by OTT to deliver niche content, applications, gaming and communications.  We are already seeing DVB/T OTT hybrids with the likes of GoogleTV in the US and Cubovision in Italy but I see a number of IPTV service providers starting to enhance their solutions with OTT delivered media.

6) Google finds a way to be Content

Google’s attempt to move into the TV space – or I should be more specific and say the TV advertising space – is being thwarted by the networks.  I cannot see that situation lasting in 2011 and we will see either a) Google buy an independent production company and start to create their own content, b) they buy a network in the US and really start to fight and/or c) they cut deals with the networks that start to deliver a win/win between the traditional broadcasters and the OTT innovators.

7) Product Placement is the new Ad Money

OTT will deliver the ability to transact through your TV screen.  This is interesting for the QVCs of this world who are always keen to find new ways of driving sales but I believe it will also start to drive commerce deeper into television programming itself.  In the UK, OFCOM are already looking at relaxing the product placement rules and this combined with 24/7 interactivity will spur advertising innovation within content.  We have seen this for years in the movie industry – just watch a James Bond movie – but within television it has been largely regulated out and has lacked the facility to close a transaction.  Some might find this an anathema but the industry must find ways to drive more revenue from programming and this is the next natural step.

8) TV Games are gift Boxed

Traditionally, STBs do video and consoles do games but that is changing fast with the Sony PS3, Microsoft’s Xbox and Nintendo’s Wii all delivering catch-up TV and on-demand movies.  But less visible is the capability of the next generation STBs to run high-quality games delivered through the OTT cloud.  The iPad has demonstrated the value of network delivered games both in terms of the consumer experience and business model.  So I see a number of TV providers adding compelling games to their content portfolios and ‘gifting’ a number of these as part of the subscription.  Watch out for companies such as Transgaming and Gameloft in this space in 2011.

9) OTT powers the Independents

I am very excited about distribution opportunities that OTT offers independent producers of content worldwide.  Scarcity of bandwidth has an evitable effect of disproportionately empowering the industry distributors that currently tightly control who gets to see what and where.  If we see open OTT to TV becoming more common place then independent television and movie producers can start to control their own distribution straight to the television and although it may not be a predominant channel for them it will allow the testing and proving of innovative new formats before they see mass market distribution.  In my view, these companies will be the making of OTT as they start to exploit the benefits of this IP-driven medium in 2011.

10) Lastly, the King is dead, long live the King

Whatever actually happens in 2011, one thing is for sure – the TV status quo is being redefined and the future winners and losers will be dictated by the activity or inactivity of the incumbents and pretenders to the industry thrones in 2011. The new TV landscape will probably not materialise for the next five years but I would strongly contend that the 2011 movers and shakers will buy themselves an opportunity to dominate that future landscape.  Equally for us industry players, making the right proposition and customers choices will be essential for our future prosperity.  Exciting and defining times, where else would we want to be!

So am I wrong or am I right?  Time will tell but happy that you tell me different before that

http://bit.ly/9rREjW

So why do I believe Google is throwing a screwball at PayTv operators?. Well according to the industry grape vine, GoogleTV is a solution which turns boring old PayTV into the ultimate OTT panacea.  Not by replacing it but by simply enhancing it.  And enhancing it without working with the PayTV operator directly but by seducing their customers to buy a retail proposition and installing inline with the HDMI out of their existing set-top box, throwing away their provider’s legacy remote control and relying solely of the GTV solution to control their TV viewing experience.  So you get all the great linear broadcast content from your favourite provider but wonderfully enhanced with a compelling search-based interface that discovers a whole new world of OTT content – oh and accompanied by lots of targeted Google ads to compel you away from the standard commercial breaks that most of us ignore anyway.

So whilst the traditional PayTV guys worldwide sit back and debate whether OTT will really be a mass-market phenoneum and devise complex strategies on how to deliver it without really opening up the world of the open internet, we have Google peddling their open religion through a feature-rich companion device.  Ironically, GoogleTV is true OTT from a hardware, software, content and experience perspective. Rumoured to be launching in the Fall in the US and likely mid-2011 in Europe, we could see a revolution not just in the consumption of Internet video on the TV but also how traditional broadcasters and aggregators embrace OTT.  God bless Google – I believe we are going to see a true acceleration of the democratisation of content consumption by consumers world-wide.  And to be honest GTV doesn’t have to be massively successful, it is the concept and threat which will galvanise the ponderous TV sector to sit up and smell the consumer-drunk coffee.

OK so I admit it – I’m excited.  I love the idea of open OTT on the TV and actually have an Amino Freedom box in my home (privilege of being the CEO) which gives me limitless access to all that is good, and sometimes very bad, on the Internet.  I still approach my TV viewing in the a traditional stylie – 1) anything in the linear broadcast I want to watch? 2) recorded anything I haven’t seen yet? 3) what is on iPlayer, ITV.com, 4OD, YouTube/leanback, SeeSaw etc etc etc.  It this last option that is slowly becoming more and more of my TV viewing and that’s why I’m excited.  I truly believe Internet video providers will start to deliver HTML5/Flash/Silverlight versions of their websites perfectly suited to the TV viewing experience.  YouTube is already leading the way with LeanBack, BBC iPlayer/bigscreen works a treat on my 50″ flat screen and even Hulu is a passable experience on a TV but don’t tell them that! And my 4Mb BT internet connection delivers a quality of experience which is probably 95% acceptable.  So count me into the revolution – I’m already a firm convert.

Remember that the GTV companion box need not be just about OTT.  It can offer an Application Store surfacing all the best Android apps including a ton of games.  It can be a clean-tech solution monitoring home energy consumption.  It can be a Video Conferencing solution on the TV.  It can manage your home security.  And if Google license enough content, it could be your only solution in a few years when your current PayTV operator’s line-up fails to justify the monthly subscription. Just look at the recent rumours of a YouTube movie service on it’s way to challenge iTunes – or maybe Google just buys Netflix? 

So what is the solution to the operators out there who are willing to stand up and fight.  Well option one is to launch their own companion box and keep hold of those precious customer relationships through offering a even better integrated experience.  Option two is to replace their existing STBs for those needy early adopters amongst their customer base and deliver a integrated premium experience to those who are happy to pay.  Option three is to take the best of the Internet and deliver it through VoD and hope the consumer doesn’t feel too short-changed and option four is to ignore it all and convince yourself TV will never change and all this is just a fad.   Clearly I would not recommend subscribing to the last option.  However, it will interesting to see who reacts first and how strongly or whether a ‘wait and see’ approach is the order of the day.

I also wonder whether a companion solution is a good route for Canvas and hbbTV to propagate their respective brands of interactivity.  Instead of forcing the consumer to replace their current DVB device it may be more expedient to enhance the services already in the market (Freeview, Sky, Virgin, BT Vision) with a Canvas wrap.  Granted, the Canvas JV will have to modify their ‘all or nothing’ UI stance but it would be a pragmatic way to achieve the JV’s objectives – to deliver consumer simplicity through an open market to create scale whilst reducing costs and increasing choice.  Similarly all across the globe, the big cable companies, the major Tier 1 telcos, the high-street retailers, other Internet giants all have the chance to lead the way into this brave new world. Oh and let’s not forget about Apple and their new iTV. It could be the prefect n-screen solution (anyone else hate the n-screen word?) demonstrating what a truly integrated approach can do for customers.

So is it just me or are we entering the most exciting three years of the television revolution?  Will it be a six out beyond the boundaries or leg-before-wicket for everyone except Google?  I’m sure you all have your own views so comment away…

http://podcast.aminocom.com/NAB_SESSION_4_Futures_Edit_v2_inc_ST.mp3

http://podcast.aminocom.com/NAB_SESSION_3_ConsumerExp_Edit_inc_ST.mp3