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Panasonic Exits US Cable Set-Top Biz

Jeff Baumgartner
1/30/2012

Panasonic Corp. (NYSE: PC) is exiting the set-top box business in the U.S., despite making progress with at least two major cable MSOs, Light Reading Cable has learned.

Two industry sources said Panasonic made a "strategic decision" to shut down the cable group as it looks for ways to cut costs and improve the overall health of the company. Panasonic, whose credit rating was recently downgraded amid fears that the company will have trouble turning around its unprofitable television business, reported a fiscal second-quarter loss of 105.8 billion yen (US$1.36 billion) while revenues declined 6 percent year-on-year.

Sources said Panasonic notified customers last week of the decision to get out of the domestic cable set-top business. It is believed that Panasonic's cable set-top group employs about 30 people, and operates offices in New Jersey and in Broomfield, Colo. It was not immediately known how many from the unit will stay with the company.

Panasonic has not announced any recent U.S. cable wins, but it is understood that it was making significant strides at Time Warner Cable Inc. (NYSE: TWC) and Cablevision Systems Corp. (NYSE: CVC). Cablevision has becoming increasingly reliant on Samsung Corp. as the MSO expands the reach of a downloadable video security system, and Panasonic was poised to become that MSO's second source for boxes that supported the new encryption scheme. (See Samsung Boxes Break In at Cablevision and Cablevision Eyes $50 Set-Top.)

Although Samsung, Pace plc and Technicolor (Euronext Paris: TCH; NYSE: TCH) have managed to break in, the loss of Panasonic leaves one less viable challenger to Motorola Mobility LLC 's and Cisco Systems Inc. (Nasdaq: CSCO)'s weakening hold on the U.S. cable set-top and security market.

It was not immediately known how the decision will affect Panasonic's plans to support cable TV services in connected TVs. At last month's International CES in Las Vegas, TW Cable demonstrated an app it is developing for Panasonic Viera TVs that would stream the MSO's subscription TV service without the need for a separate set-top box, according to a report from NewTeeVee. Panasonic had yet to supply a statement on the status of its U.S. cable business as of Sunday afternoon.

The decision to shut down the U.S. set-top group effectively ends Panasonic's latest flirtation with the cable industry.

Panasonic's cable past
Before jumping back into the game and hiring cable vet David Nicholas to head up Panasonic's U.S. cable group in 2010 and to reset its strategy, Panasonic had focused its domestic cable strategy on tru2way and working with Comcast Corp. (Nasdaq: CMCSA, CMCSK).

In 2006, Comcast awarded Panasonic an initial order of 250,000 HD-DVR boxes. At the 2008 CES, Panasonic and Comcast announced a portable DVR based on tru2way that never got deployed. Panasonic later dabbled in a new breed of "set-back" tru2way boxes designed to mount on the back of some flat-screen TV models. That strategy didn't go anywhere, either. (See Panasonic Names US Cable Leader, Comcast, Panasonic Unveil Portable DVR , Comcast, Panny Polishing Portable DVR and CableLabs Clears Panasonic Tru2way Box.)



Panasonic also was a champion of tru2way at retail, teaming with Comcast to sell two tru2way HDTV models in Chicago; Highlands Ranch, Colo.; and Atlanta. They didn't sell well as consumers balked at a paying a premium that made tru2way sets about $200 to $300 more expensive than similar TV models. Panasonic stopped selling tru2way TVs in 2010. (See Denver, Chicago First to Get Tru2way TVs, Panasonic Tunes Out Tru2way TVs and Tru2way: Epic Fail at Retail)

Much of Panasonic's initial tru2way efforts were under the direction of Dr. Paul Liao, who was the CTO of Panasonic North America before being appointed president and CEO of CableLabs in June 2009. Liao won't be staying on with CableLabs when his contract with the Colorado-based R&D house expires at the end of 2012. (See Panasonic's Liao Is New CableLabs CEO and CableLabs Confirms CEO's 2012 Departure.)

— Jeff Baumgartner, Site Editor, Light Reading Cable



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BDRanger
BDRanger
12/5/2012 | 5:44:08 PM
re: Panasonic Exits US Cable Set-Top Biz


Now that Comcast has rolled out Xfinity in the Indianapolis market, it would really be nice if Panasonic or some other company would introduce a tru2way set back box at retail that could be used with a consumer's flat panel TV.


All of my older TVs have CableCARDs and receive ALL of the HD channels that Xfinity provides.


My newer sets have NO set top boxes and only receive the locals in HD.


I refuse to use a Comcast box with the extra remote.


What I need/want is for some manufacturer to build a tru2way set back box like the one that ADB manufactures and sell it at retail for consumers to purchase.


There is a market for such a device and I am certain that quite a few consumers would be interested in a viable alternative to the what the cable companies offer.


Bruce D Ranger


Indianapolis IN


 


 


 


 


 

msilbey
msilbey
12/5/2012 | 5:44:07 PM
re: Panasonic Exits US Cable Set-Top Biz


Just another reminder to be skeptical of all things announced at CES. Panasonic made a huge splash with Comcast back in 2008, and it's a pretty sad result to see where things ended up four years later. 


Meanwhile, I'm curious about the current state of Cablevision's downloadable security deployment you mentioned. Any word on how that's working out? Or where the other MSOs are headed on that front? 

Jeff Baumgartner
Jeff Baumgartner
12/5/2012 | 5:44:07 PM
re: Panasonic Exits US Cable Set-Top Biz


I haven't seen much evidence of MSO deployments of tru2way set-backs outside of the device ADB developed.  Charter is using that box in support of some hotel services, and I believe TWC at least kicked the tires on it.  At one point, Sony,  which had been partering with ADB, was testing the box with Comcast (or maybe it was just ADB that was doing the testing). Anyway, the device was being shown off at the Sony Style store in the Comcast Center in Philadelphia at one point, but I'm not sure if that went anywhere or if the store demo is still active.


If you're looking for a low-profile, out of sight box that can support HDTV services, keep an eye out for a new type of HD-DTA.  Comcast has been testing them, and a version of that device made by Motorola just made its way through the FCC. It's a one-way box , so it won't do VoD inherently,  though it theoretically could do on demand if Comcast decides to do the work necessary so the DTA could be force-tuned using its iPad app and set up the VoD session that way... at least that's how I understand it.  But I doubt Comcast would do any such thing without some clear direction from the FCC as to whether adding that capability would violate the terms of the FCC's DTA waivers.  But that doesn't answer your retail question... you'd still have to lease them from the operator. JB


 

Cooper10
Cooper10
12/5/2012 | 5:44:07 PM
re: Panasonic Exits US Cable Set-Top Biz


"I want all of my own equipment, no rentals from Comcast or anyone else" 


Understand the sentiment, but evidence has shown that your point of view isn't shared by enough consumers to make this a worthwhile market to pursue.  See TiVo as exhibit A - they poured hundreds of millions of $$ trying to drive consumers to purchase vs. lease CE, and their results did not improve...until they started selling their equipment to service providers (Virgin, Charter, etc.), who in turn, you guessed it, lease them to consumers.


DBS also used to sell CPE - and hit a ceiling on penetration until they adopted a CPE lease model.  The vast majority of consumers simply prefer the lease model for pay TV equipment, doesn't matter that the CE industry and the FCC would prefer that this wasn't the case. 

BDRanger
BDRanger
12/5/2012 | 5:44:07 PM
re: Panasonic Exits US Cable Set-Top Biz


JB,


I appreciate your response, but I want all of my own equipment, no rentals from Comcast or anyone else.


All of my TVs have good remotes and I want to reduce the clutter, not increase it.


The ADB SBB is the closest thing that I have seen, but they won't sell it to me.


If they did, then all I would need is a CableCARD from Comcast.


Bruce


Indianapolis IN


 


 


 

Jeff Baumgartner
Jeff Baumgartner
12/5/2012 | 5:44:06 PM
re: Panasonic Exits US Cable Set-Top Biz


Cablevision's downloadable security system is widely deployed on the Samsung platform (they were on the hook to get it deployed by a certain deadline or risk fines per the FCC waiver they received) and it sounds like they are interested in spinning up a 2nd source for it.  With Panasonic out of the picture, I suppose it could open the door to another supplier if they think it's worth the risk.  Maybe Cisco, since they're already a customer of Cablevision's?


I've heard that TWC has shown some interest in Cablevision's downloadable approach, but i don't know how serious they are about it. TWC already buys boxes from Samsung, so at least they have a vendor on board that's very familiar with the system Cablevision's using. 


Also, got a heads up that some other operators are starting to use downloadable security from a different supplier and platform...  more on that soon. JB 

Jeff Baumgartner
Jeff Baumgartner
12/5/2012 | 5:44:05 PM
re: Panasonic Exits US Cable Set-Top Biz


one idea behind it, at least in the early days, was to  bust up Moto/Cisco's hold on security and open things up to more suppliers and make  boxes cheaper because you don't need to rely on the CableCARD because downloadable security also qualifies as separable security in the FCC's eyes.  Cablevision envisions $50 boxes out of its approach, which relies on the network DVR, so you don't have  to deal with the cost of local storage. Cablevision has also mentioned  in regulatory filings that its approach with the NDS key ladder could be extended to other types of CE devices.


I think the cross-MSO PolyCipher idea has long sailed, but, like you said, with the move toward IP migration, the notion of a more software-centric or downloadable  approach to video security may open up again or at least give cable more reason to pursue it again.  JB




 
msilbey
msilbey
12/5/2012 | 5:44:05 PM
re: Panasonic Exits US Cable Set-Top Biz


Wish I could better assess the potential impact of downloadable security at this point. The theoretical advantage is that more hardware companies could make set-tops capable of receiving encrypted QAM channels. But how many companies want to get into that business now that all the attention as shifted to IP? Sure, QAM is still going to be around for quite a while, but it's a legacy technology nonetheless. I would guess the only companies that could be successful at building QAM boxes going forward are the ones who have the supply chains in place to make the margins worthwhile. Otherwise it's on to newer/bigger/better.


Did we miss the boat with DCAS? Or does the future of hybrid QAM/IP equipment mean there's still room for DCAS development? And perhaps even a future at retail?

AESerm
AESerm
12/5/2012 | 5:44:04 PM
re: Panasonic Exits US Cable Set-Top Biz


Wasn't the argument for DCAS lower cost of software vs. hardware? Potential FCC fines (as in CVC) for not adopting it could impact that calculation. as might any residual toxic glow from the Polycipher fail. Or maybe that's just in my head.

Jeff Baumgartner
Jeff Baumgartner
12/5/2012 | 5:44:01 PM
re: Panasonic Exits US Cable Set-Top Biz


Interestingly enough the potential fines on Cablevision came from conditions the MSO outlined itself in its proposal... they suggested a $5K per day penalty in the unlikely event that the MSO missed a deployment commitment. They unsurprisingly hit every deadline they set out to hit. JB


 

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