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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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sgan201 12/4/2012 | 11:35:27 PM
re: Is Video In Demand? Hi PackMan,
1) Each DVD = 4.7 GigaBytes.. 15,000 or more DVD
= 70.5 Terabytes = $$$$$.
Network exists-> you must be joking.. To deliver 10 to 15 minutes deleievry time, 15 minutes = 900 seconds to deliver let say 1Gigabytes = 80 Mbps per seconds..
How many people has 80 Mbps per seconds to home??

2) Netflix/Video rental place do not have pay per DVD fee for content.. Do a Google search and do your research. Do your home work before you write any message..

If Content licensing is such a easy problem to solve we would have on-line music and movie distribution for a long time..

3) See number 1

4) You must be joking again..

5) See number one and do your math..

Who is going to provide the infracture at so that it can earn $19.95 per month to match Netflix's price.

rjmcmahon 12/4/2012 | 11:35:26 PM
re: Is Video In Demand? Who is going to provide the infracture at so that it can earn $19.95 per month to match Netflix's price.

In a customer owned last mile the cost of bit distribution will quickly trend towards the real costs. The price of a video viewing will be negotiated by the customer and the rights holders.
PackMan 12/4/2012 | 11:35:13 PM
re: Is Video In Demand? I'm not talking about movie downloading - I'm talking about real-time streaming of the movie, which takes on the order of 2-15Mbps, not 80Mbps. 2-15Mbps is certainly do-able using existing network and technology - DSL, cable modem, etc.

And let me re-iterate that licensing isn't an issue, otherwise thousands of hotels everywhere wouldn't be able to do it. They already have on-line movie distribution. VoD is already starting to be offered by some IOCs to the public.

And 70.5 Terabytes is more like "$" not "$$$$$".
rjmcmahon 12/4/2012 | 11:35:13 PM
re: Is Video In Demand? And let me re-iterate that licensing isn't an issue, otherwise thousands of hotels everywhere wouldn't be able to do it.

You need to read up on broadcasting rights. This simplification is completely wrong.

Bit distributors must honor property rights if our industry is going to progress. Any groups basing their business on stolen works is a path to failure. And make no mistake about, that's exactly the direction the current cable cos and telcos are heading.

The suppliers must be paid. The best way to achieve that is for customers to pay direct.
rjmcmahon 12/4/2012 | 11:35:09 PM
re: Is Video In Demand? However the myriad of vendors that are developing and preparing to deploy VoD will be able to fit distribution fees into a reasonable cost model.

What myriad of vendors? Are you talking about tech IO equipment companies? These guys don't have any customers and Wall Street has stopped funding the speculation. The streaming industry has gone bankrupt for all practical purposes. The recurring bw costs were orders of magnitude too expensive and that was w/o paying for content rights.

Just because companies like Netflix only pay a one-time fee doesn't make it a monumentally better cost model.

Netflix's fate is still in question. It some ways it's a book of the month club. Who will pay for that when DVDs are becoming available in every convenience store and every narrow channel, packed and ready for purchase on demand?
PackMan 12/4/2012 | 11:35:09 PM
re: Is Video In Demand? Sorry, I should rephrase that - licensing isn't an *overcomable* issue. Certainly licensing fees must be paid as appropriate. However the myriad of vendors that are developing and preparing to deploy VoD will be able to fit distribution fees into a reasonable cost model. Just because companies like Netflix only pay a one-time fee doesn't make it a monumentally better cost model.
cc_junk 12/4/2012 | 11:35:07 PM
re: Is Video In Demand? There was an article in the Sept 23, 2002 New York Times, "New Economy" section by Peter Wayner exactly about the ability of Internet to compete with the Netflix model.

Netflix cost of mailing is what? $0.37 plus their internal handling. The estimates in the article had Netflix shipping almost as many bytes per day as is carried on the entire North Amercian Internet backbone. (that was for Netflix shipping 190,000 discs per day)

When I think of how much money is spent annually on just the one large Tier 1 ISP backbone that I am familiar with there is no way Internet delivery can compete for the Netflix business (of course at 19.95/mo maybe Netflix is not making any money). The Internet video delivery business has to go after a different market, i.e., real time delivery.

I remember the old version of Tanenbaum's "Computer Networks" textbook talking about the logic of trying to use packet networks to deliver solve every content delivery problem. He said something about never underestimate the capacity of a station wagon full of mag tapes hurtling down the highway. Here we can't underestimate the capacity of a USPS trailer full of DVDs speeding down I95. The latency is awful, but the throughput is tremendous.
rjmcmahon 12/4/2012 | 11:35:06 PM
re: Is Video In Demand? The Internet video delivery business has to go after a different market, i.e., real time delivery.

I'm not sure what you mean by realtime. Are you talking about an OJ low speed chase, an embedded journalist in Iraq, or a superbowl? These types of events are less than 5% of video viewing.

On-demand, making sure everybody gets paid, and opening the markets so anybody can publish seem to be the critical components by my judgement. Throwing technology at that problem is about 2-5% of any solution.

The RBOCs have both arms tied behind their backs. Unfortunately, the FCC is killing off the chances for others to enter by not requiring unbundling of the fibers. The net effect is that our information economy is being delayed, maybe by a generation or two, while Asia just marches on forward. (The complaints on these boards about H1Bs reveals that net effect.)
rjmcmahon 12/4/2012 | 11:35:03 PM
re: Is Video In Demand? You are overstating the advanced Information Economy in Asia relative to the USA. The picture will be very different in 10 years.

I'll have to defer to you on this one. My Asian info is filtered much. Let's hope you are correct and I am mistaken.

PS. What's Singapore's info economy status?
optical_optimist 12/4/2012 | 11:35:03 PM
re: Is Video In Demand? Why do you think Asia will march forward with respect to Video on Demand much faster than the USA ?? My gut feeling is that the same entrenched interests within Broadcast, Cable, Media, and PTT will delay its rollout in Asia.

Yes, many of the countries with top DSL penetration are in Asia, but I don't think this is a result of competition related to the unbundling of PTT copper pairs. Rather, the housing units are more dense geographically, allowing DSL to be deployed more economically. Therefore, better competition exists between Cable TV (coax) and PTT in Asia, but clearly the RBOCs in the USA are waking up that Cable TV is a serious triple play threat. This is why the Fiber to the Premises RFP has been released in the USA.

In the end, Video on Demand success in the USA will be slowed more by the entrenched content owners (film studios, etc.) than by access loop issues.

You are overstating the advanced Information Economy in Asia relative to the USA. The picture will be very different in 10 years.
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