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7 Things to Know About Your Future TV

Craig Matsumoto
LR Cable News Analysis
Craig Matsumoto

The connected TV is on the verge of a lot of great things, according to speakers at this week's Connections, a conference series put on by Parks Associates . But a lot of potential remains several steps away, as consumers get more acclimated to technology and as operators find more ways to exploit the cloud.

Here's what we took away from some of the Connections panels.

1. The cloud is coming home.
The suggestion came up that a box could send video traffic around the home network, using the Digital Living Network Alliance (DLNA) standard. But the other participants thought most development in this area was going to be cloud-based. "The problem today is that the platforms don't really have the memory space, and the consumer experience becomes a wait for the ad to pop up," said Russ Shafer, head of marketing for Yahoo Inc. (Nasdaq: YHOO)'s Connected TV.

2. But not any time soon.
"The infrastructure required to put everything in the cloud is humongous," said Paddy Rao, vice president of products for Sling. He knows that because he's been watching EchoStar Corp. LLC (Nasdaq: SATS), Sling's new corporate overlord, put content up on the cloud. So, while the idea is nice, it's still expensive, and it's unclear how long it would take to recoup that money.

3. Free samples work.
Bismarck Lepe, a founder of Ooyala Inc. , described his company's experiment with trying to get people to pay for video. Ooyala used a range of prices and, maybe more importantly, a range of time spans for a free preview window, from 30 seconds up to nine minutes.

A couple of arbitrary data points: When the preview window was stretched to three minutes, rather than two, revenues doubled. Likewise, when the price shrank to 49 cents from 99 cents, revenues doubled again.

4. People still love their broadcast TV.
Ammo for those who don't believe in cord-cutting: 93 percent of the people in an Ericsson AB (Nasdaq: ERIC) study were found to still watch broadcast TV. "So, this idea of cord-cutting is incorrect," said David Price, an Ericsson vice president of business development (who was representing the MPEG Industry Forum on one panel).

Well, that's one opinion.

5. Moore's Law is going unused.
The processing power in the set-top box is always going up, but "we're not using it," said Jaime Fink, senior vice president of technology for Pace plc . Part of it is because a lot of the work is happening in the network rather than the box. There's also the fact that set-top boxes don't have armies of app developers the way smartphones do.

6. The user interface counts for a lot.
It's the main reason why Netflix has caught on with online consumers, said Jim Funk, a vice president with Roku Inc. "People really like the experience," he said. "Although the numbers are pretty small, they're growing."

On a separate panel, the same point was made by Edgar Villalpando, senior vice president of marketing for ActiveVideo "The reason Netflix is successful isn't their library of content. It's good, but it's not because of that. It's because they have really good navigation," he said. He added that better navigation -- abilities that go beyond the remote control -- is what most operators are asking for. (See points 1 and 2.) But:

7. You won't have to wave at your TV.
At least Peter Schwartz, senior director of product management for Vizio Inc. , thinks you won't. His company has been looking at Microsoft Kinect, which reads body movements, to see if it's an option for replacing the remote control. He didn't sound convinced.

What's more likely, and more obvious, is that the flood of interest in smartphones and tablets will turn those devices into remote-control options. "There'll be a lot of innovation in interfaces using portable devices," said Roku's Funk, and we're not quoting that just to be able to say "Roku's funk." (Well, maybe.)

— Craig Matsumoto, West Coast Editor, Light Reading

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User Rank: Light Beer
12/5/2012 | 5:00:31 PM
re: 7 Things to Know About Your Future TV

User interface may be important, but if there is no library, then Netflix will not continue to be successful. Content is king, always will be.  In fact, the reason many ppl are not willing to cut the cord is because there is still a lot of content that cannot be had online, at least not without a lot of navigation (which kind of supports the importance of a good User interface... ok, good call). 

One point I want to make is that I don't think we are as far away from IP-centric acceptance as this article suggests. 

Absolutely correct in saying that infrastructure needs are vast in order for this to happen seamlessly.  But isn't that what we have been saying all these years?

Recouping costs issue IMO is more about "who" is going to recoup the costs vs who is going to lose their revenue streams.  Carriers who have the big pipes will benefit, the consumer will benefit, and companies that have the insight to build a distribution channel that gives consumers what they want without subjecting them to 10 minutes of untargeted marketing strategies(ads that do not target consumers but only waste their time while they watch info about products they will never buy).

If HULU gets a decent library and finds a way to distribute quality video,  offers VOD of current programing, and improves the software that identifies the needs of the consumers who are watching, they could clean up.  Advertising becomes more effective when the target market is better identified. Finding an effective way to present informative, with somewhat brief ads to market products to consumers who are more likely to buy is a win win situation for everyone.  Content owners can either get on this wagon or they can get left at the gate as in the case of the music industry. 

PPV/VOD for new content (e.g. newly released on DVD movies) currently costs more than driving and picking up a DVD.  $5.99 is too much to charge when the costs to distribute diminish quickly with greater numbers. Content suppliers do not seem to understand the calculations for improved/diminishing returns price point equillibrium.  There is a point in the cost structure where maximum $$ are made at a certain price point.  Guess what? .. it is almost never the highest price charged when it comes to this type of consumer product!  I think content creators/distributors need to take an econ course.  Demand increases as costs decrease (wow, how hard is that?). Find the price point where the increased purchases will increase net most effectively based on cost reduction points.  Here is a clue, it isn't $5.99/unit (though in a year or two, given inflation .. it may be).   It doesn't matter really, because eventually someone will be willing to eat the upfront costs in order to make the fortune that is just sitting there on the back end.  Netflix understands this principle in part, but perhaps they too do not quite understand the price/demand/cost equilibrium.  IMO they are burning too many channels for content with $8.99/mo and frankly $99/year isn't a good price point either (though netflix strategy seems to be relying mainly on: numbers of subscribers=bargaining ability, so who's to say who may be right or wrong here).

Point here is that a more consumer aligned distribution structure is going to happen.  Content distribution more closely aligned with consumer needs due to increased channels of distribution (the internet).  Content creators/distributors can either find a way to meet consumer needs, or they can get displaced by those who are forward thinking enough to find a better way to align the demand with product.  They can keep dragging their feet, but innovation will result in more for less, or at least the appearence of more for less.  Get on board, or get left behind.. it is that simple.

User Rank: Light Sabre
12/5/2012 | 5:00:31 PM
re: 7 Things to Know About Your Future TV

It's interesting that none of your seven key takeaways involved the term UGC.

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