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Cable/Video

Is Video In Demand?

Deals in the video-on-demand market are once again revving up debate as to whether these applications can help kickstart the telecom industry.

Up to now, the digital video market has been a question mark (see Digital TV: Who'll Tune In? and We Want Our Packet TV!). Folks haven't seemed eager to use their computers to rent movies if it's easier to drive to the corner store or use pay-per-view services.

Now that seems to be changing. According to Tom Nolle, president of consultancy CIMI Corp., customers like movies that can be downloaded via the Internet and then played and replayed at the customer's behest, with pauses for pit stops and snack retrieval. Two deals, announced today, put the spotlight back on the market:

  • SkyStream Networks Inc. announced $4 million in new funding from several investors, including Amerindo Investment Advisors Inc., AOL Time Warner Inc. (NYSE: AOL), Comcast Interactive Capital, and Shaw Communications Inc. The input completes SkyStream's fifth round of funding, the majority of which closed back in March 2003 and now totals $29 million for this year (see SkyStream Scores More).

    SkyStream CEO Jim Olson says the funding will be used to increase development around its Mediaplex product line, which converts analog video signals to digital ones for use on packetized networks (see SkyStream Wants Its IP TV ). The multiple systems operators (MSOs) that are helping will also direct R&D for the product, ensuring it meets what's shaping up to be a big market in video-on-demand and interactive TV, Olson says.

  • BellSouth Corp. (NYSE: BLS) announced a partnership with Movielink, an online video rental provider, to enable DSL customers to download movies via the Internet, then play them separately on home equipment. In its press release, BellSouth cites figures from GartnerG2 that indicate the market for video-on-demand from cable TV operators could hit $2.8 billion by 2006 (see BellSouth Goes to the Movies).

Such market research figures, as they often are, may be overly optimistic, but analysts see things heading in the right direction.

CIMI Corp.'s Nolle notes that the model acording to which films are downloaded to a hard drive and played back at the customer's convenience makes it easier to apply encryption and license control as well.

In BellSouth's new service, for example, customers pick movies on their DSL screens and pay between $2.95 and $4.99 to download (pricing is set by the movie studio that distributes the film). Flicks can be viewed on the computer, or transferred to TV using a set-top box, anytime within 30 days. Each customer has 24 hours to play, replay, stop, and start the video, which is copy-protected. Nolle thinks it could be an $8 billion to $18 billion market annually.

Other IP video options have emerged. According to media and entertainment analyst Adi Kishore of Yankee Group, another big market is forming among cable TV providers that are eager to offer video rentals, not on the Internet, but on their own dedicated networks. The technology involves streaming video from specially designated servers. The speed of delivery is faster than store-and-play via the Internet; delivery is straight to the TV; and the quality is significantly better than what can be obtained on a computer monitor.

Kishore says streaming video services from MSOs are growing faster than downloads. He estimates that 10 million to 11 million cable TV users in the U.S. now have access to services from their MSOs, and that by 2007, 32.5 million will be using such services.

Counter to this view, Nolle says streaming video involves a range of problems not common to video on demand, since greater scaleability, security, and administrative options are required. This, he feels, could hinder its spread among RBOCs.

One thing all parties agree on is that video is on the rise. While kinks remain to be worked out, service providers and vendors think consumers are ready for more video from their Internet providers, and vice versa. They're starting to see the synergies among PCs, phones, and other gear lying around their living space.

On the way to market expansion, there will be some false starts and dead ends, as service providers of all kinds find a niche. "You're going to find a lot of strategies hybridized, as cable and satellite providers and RBOCs extend video over their networks... but there's no question that digital video content will be a powerful revenue generator in the future," Nolle says.

— Mary Jander, Senior Editor, Light Reading

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desikar 12/4/2012 | 11:36:13 PM
re: Is Video In Demand? The last line says it all :)

Could someone in the know shed some light on the protocols used for compression / delivery and how long it is likely to take to download a 2 hr. movie? Thanks.

-desikar
PackMan 12/4/2012 | 11:36:11 PM
re: Is Video In Demand? ----
Could someone in the know shed some light on the protocols used for compression / delivery and how long it is likely to take to download a 2 hr. movie? Thanks
----

It depends on what equipment is being used for the download. Typical compression of a broadcast TV signal is about 2-3 Mbps. Thus downloading a 2 hour movie over 1.5Mbps DSL lite or cable modem to a hard drive would take about 3 hours. Thus I think this model is unacceptable. When I decide to rent a movie, most of the time I don't want to wait that long, I'm ready to watch within 15-20 minutes. Thus either VDSL, heavy ADSL, or cable equivalent is necessary. In this case download could be 15-20 minutes or so. Or, depending on the network, it could just be streamed directly to the STB and watched in real time as its downloaded, or a hybrid of the two.

MPEG-4 can reduce this down to 1-1.5Mbps or so. HDTV requires a fair amount more bandwidth - I believe about 15Mbps on MPEG-2 and about 6Mbps on MPEG-4 or H.264.
PacketPadre 12/4/2012 | 11:36:11 PM
re: Is Video In Demand? A few billion here and a few billion there and pretty soon you're talking about real money!

Course, I'm still trying to figure out how and why he expects me to connect my set top box (which is supplied by my cable co) to my hard drive which is connected to my DSL modem (which is supplied by my telco). Seems like if I wanted to watch it on TV, I'd just order it directly via pay per view or digital on-demand service from the my cable or dish company...
PackMan 12/4/2012 | 11:36:10 PM
re: Is Video In Demand? -----
Course, I'm still trying to figure out how and why he expects me to connect my set top box (which is supplied by my cable co) to my hard drive which is connected to my DSL modem (which is supplied by my telco). Seems like if I wanted to watch it on TV, I'd just order it directly via pay per view or digital on-demand service from the my cable or dish company...
-----

I agree.

Though don't confuse "Video on Demand" with "Pay per View". PPV is what you see now with satellite service, and is done by using existing channels and staggering broadcast times. PPV is strictly a broadcast service. VoD on the other hand is a point-to-point service, requiring either non-real-time downloads (which can be done directly to the STB if it has enough memory), or a high amount of additional bandwith to stream it real-time from a VoD server.

VoD over satellite is not feasible, which is why eventually satellite TV service will go the way of the dodo bird. It'll be a long time, but eventually it will happen.
skeptic 12/4/2012 | 11:36:09 PM
re: Is Video In Demand? When I decide to rent a movie, most of the time I don't want to wait that long, I'm ready to watch within 15-20 minutes.
----------
While thats true of many people, the relative
success of netflix shows that there is a set
of people who would probably be willing to
wait slightly longer than that.

Ultimatly, you want to get to a 15-20 minute
download model, but getting to something like
the netflix model minus the physical media
and the shipping is still very compelling and
has a reasonable business case.

PacketPadre 12/4/2012 | 11:36:09 PM
re: Is Video In Demand? So we agree that the application in the article is largely being served by other technologies. That estimate of $8 to $18 billion seems pretty absurd when one considers it on a per DSL connection basis. It comes out to over 400 movies per year for every domestic subscriber.

That notwithstanding, what do you think are the obstacles for providing a service similar to VoD via satellite using DVR type equipment? Clearly Tivo has extended the viability of sat TV, don't you think?
PackMan 12/4/2012 | 11:36:06 PM
re: Is Video In Demand? >>When I decide to rent a movie, most of the time >>I don't want to wait that long, I'm ready to >>watch within 15-20 minutes.
----------
>While thats true of many people, the relative
>success of netflix shows that there is a set
>of people who would probably be willing to
>wait slightly longer than that.

>Ultimatly, you want to get to a 15-20 minute
>download model, but getting to something like
>the netflix model minus the physical media
>and the shipping is still very compelling and
>has a reasonable business case.

You're right, and perhaps I was a little too harsh in branding the model "unacceptable". I'm thinking more in the long term; eventually when John Doe who downloads his movies to his PC and watches them 2 hours later sees that his brother Joe Doe can watch them immediately, he's gonna want that.

A comparison is dial-up internet access. It'll fly for a while and make money for a lot of people, but eventually it'll be gone when a better service (broadband) becomes cheap enough and ubiquitous. The difference here is that the ultimate model (real-time VoD) will be available almost as soon as the previous model (downloadable movies), not 20 years later like DSL/Cable was to dial-up.

PackMan 12/4/2012 | 11:36:06 PM
re: Is Video In Demand? ----
So we agree that the application in the article is largely being served by other technologies. That estimate of $8 to $18 billion seems pretty absurd when one considers it on a per DSL connection basis. It comes out to over 400 movies per year for every domestic subscriber.
----
That estimate is long-term, thus current DSL/cable modem subscriber numbers can't be applied. If instead you eventually have 80% broadband pentration, about 300 million in the U.S. (accounting for population growth), then that's only about $30-$60 per year per sub, which is about 10 movies. Even at just 40% broadband penetration that still just 20 movies per year.

----
That notwithstanding, what do you think are the obstacles for providing a service similar to VoD via satellite using DVR type equipment? Clearly Tivo has extended the viability of sat TV, don't you think?
----
Bandwidth, my friend. To be honest, I don't know the bandwidth numbers for satellite (I'd love if someone could provide them), but there's no way they scale well enough to provide VoD service for 10's of millions of subscribers. That requires distributed storage over optical networks.
sgan201 12/4/2012 | 11:35:43 PM
re: Is Video In Demand? Hi,
Imagine

1) Having larger selection of DVD than NetFlix..
Huge Storage Area Network..

2) Netflix only pay once for the content -> Price of DVD and rent forever

3) Netflix do not have to build a network (US Postal Service provide that) to deliver the content

4) DVD -> High quality

5) Charge less than Netflix and still make money after sunking the CAPEX and OPEX on the network..

Where is the business model??
PackMan 12/4/2012 | 11:35:38 PM
re: Is Video In Demand? >Hi,
>Imagine

>1) Having larger selection of DVD than NetFlix..
>Huge Storage Area Network..

Network already exists - the Internet. Only new requirement is regional storage servers.

>2) Netflix only pay once for the content -> >Price of DVD and rent forever

Content licensing is an issue that could be easily worked out. I'm pretty sure Netflix pays a per-DVD fee for content anyhow.

>3) Netflix do not have to build a network (US >Postal Service provide that) to deliver the >content

The network is already build, for the most part, for broadband internet access.

>4) DVD -> High quality

HDTV = Higher quality than DVD

>5) Charge less than Netflix and still make money >after sunking the CAPEX and OPEX on the network..

See #3

>Where is the business model??

After the infrastructure is in place, the cost of delivering a movie is only per-viewing royalty. Netflix costs are the same royalty, plus DVD manufacturing, plus shipping and handling.
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