Delivering TV over Web

TV coming as a service over Broadband/Internet… everybody is rolling up their sleeves and getting ready. Biggest hurdle – negotiating content license with Content Creators & Publishers.

Amplify’d from adage.com

A group of deep-pocketed companies, including Microsoft and Verizon, are exploring delivering TV service over the web, a move that could disrupt the economics of cable TV and lead to a new generation of “virtual” cable companies that provide TV without owning the pipe into the home.

Neither is close to rolling out their own web TV service, but both are determined to secure the rights so that they have the option of doing so in the future. They’re not alone: Cable operators are looking at web delivery to leap the confines of their wired network, and video-on-demand services such as Hulu, Apple and Amazon, as well as other brands not generally associated with TV, are looking to enter the TV market.

The notion of an “over-the-top” video service that bypasses cable and satellite networks has been around for a long time but generally has been held back by two main factors: programmers’ reluctant to license new players and cable, telco and satellite operators’ control over the access to the home. They’ve also been held back by the limitations of the web itself: The infrastructure just isn’t there to support as many live simultaneous streams of content as a popular live event like, say, the Super Bowl would create.

“Somebody is going to pull the trigger this year. It may not be 250 channels in HD, but it will be at a minimum a good handful of channels with subscription on-demand and the ability to get the content on lots of devices,” said Braxton Jarratt, CEO of Clear Leap, which also provides enabling technology for web-delivered TV. Read more at adage.com

See this Amp at http://bit.ly/h1Ua8J

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Experience Trumps Features

Steve Jobs was quoted saying the following at the launch of iPad2 earlier this week:

Apple’s pushing it as a giant leap forward. That’s it for the video. Again, this is the intersection between technology and liberal arts. It’s in Apple’s DNA that technology is not enough. Hardware and software need to work together. Nowhere more true than in the post-PC market. Competitors describe tablets like PCs, with specs and the like, but the iPad shows that it’s all about the intertwined software and hardware. They need to be easier to use and more intuitive than PCs. Jobs thinks that they’re going to be competitive.

This really goes to the heart of how different Apple is from Google. Let me give you some evidence, Google on its GoogleTV effort announced an interesting set of features in the September/October 2010 timeframe – you can read about them here. Of specific interest is the one about “Fling”:

Fling a video to your television

Find a great website on your phone and want to show it to everyone? Now you can. “Fling” what you’re watching, listening to, or doing on your phone by sending it to your TV with the press of a button.

It received feedback and coverage, and NPD’s Ross Rubin tweeted about it as well:

Looks like Google TV’s ‘Fling’ feature will be its counterpart to Apple TV’s AirPlay.

The reality is far from it – and not because the feature does NOT exist but because the experience is tedious. A great consumer experience removes the challenge, removes the complication… In order to “Fling” a page or a video to the TV from an Android phone – you have to “Share”. Yes “Share” – there is no simple press of a button. On the Browser bring up the “Menu” (1), select “Share” (2), and then select “Google TV Application” (and that’s 3). The idea that it can ‘flung’ is not intuitive, you don’t know anything about it.

Contrast that with Apple’s Airplay, a nice icon shows up in a Media Player (with IOS 4.3 supposedly AirPlay will become available to third party apps as well) – tap the Icon, and select the TV/Device to ‘airplay’ to. The context is within the application and it is not being called share.

Now, purely technically, can Google implementation improve – absolutely yes. The key difference is that they release features with plenty room for consumer experience optimization.

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Notes:

1. Snapstick with meager resources gets it (check out how they “snap” the video to the large TV) BUT to be fair – you need to use their app, and their box connected to the TV

2. Business Insider’s Dan Frommer in a blog post today shows that GoogleTV-based Logitech Revue is ranked #563 compared to AppleTV at #10 on Amazon’s Best Selling Electronics.

 

Logitech Revue sold 93,400 Units as of Q4 2010

The Logitech Revue has two primary peripherals – MiniController and the TV Cam. Per Logitech’s 10-Q for the quarter ending 12/31/2010 – Revue and peripherals sales were $23.4million.

Assuming all of this was only Revue and using an ASP of $250 (instead of $299, since they dropped it during the Holidays) – it would result in an approximate sale of 93,400 Units in little less than 3 months ….

Note R&D expenses were incurred for Revue development – with the development being outsourced? 10-Q makes special note of increase in Consulting Fees due to Revue. And also Marketing & Selling expenses were higher due to Harmony and Revue. All those loft parties apparently did no good …

A detailed analysis at some point with a better model may be more useful. Below are the significant statements pertaining to Google TV and Revue (mentioned 23 times) in the 10-Q.

Amplify’d from www.sec.gov

For home entertainment systems, we offer the Harmony line of advanced remote controls, Squeezebox wireless music solutions and, in the United States, a line of Logitech products for the Google TV platform, including the Logitech Revue companion box, Logitech Mini-Controller and Logitech TV Cam with HD Vid service. For gaming consoles, we offer a range of gaming controllers and microphones, as well as other accessories.

Adoption of the new accounting guidance primarily impacted the revenue recognized from Logitech Revue and our LifeSize video conferencing products. The adoption had no impact on revenue recognized from the remainder of our peripherals, as they are not multiple-deliverable revenue arrangements.

The sale of Logitech Revue consists of two deliverables: the hardware with essential software delivered at the time of sale, and unspecified additional software upgrades to the essential software on a when-and-if-available basis. Logitech allocates arrangement consideration to each of these deliverables using a selling price hierarchy. Under the new accounting guidance, the selling price is based on VSOE of fair value, if available, TPE if VSOE is not available, or ESP if neither VSOE nor TPE is available. The relative selling price of the hardware with the essential software is based on ESP. The relative selling price of future upgrades to the essential software is based on TPE. Amounts allocated to the delivered hardware and essential software are recognized at the time of sale provided the other conditions for revenue recognition have been met. Amounts allocated to the future unspecified software upgrade rights are deferred and recognized ratably over the estimated 24-month life of the hardware. There was no impact to prior period financial statements from adopting the new accounting guidance as it relates to Logitech Revue, because there were no sales of the Logitech Revue prior to adoption of the guidance.

We achieved retail sales growth in all product families during the three months ended December 31, 2010 compared with the same period in the prior fiscal year, with double digit percentage growth in pointing devices, video, gaming and digital home. Digital home is a new product family combining Harmony Remotes, Logitech Revue with Google TV and peripherals associated with the Google TV platform.

To date the platform has not met widespread consumer acceptance and our sales of Logitech Revue and related products have been below our expectations.

In the three months ended December 31, 2010, our retail average selling price increased 3% compared with the three months ended December 31, 2009, and increased 16% compared with the three months ended September 30, 2010, reflecting in part the launch of Logitech Revue in October 2010

In the Americas region, retail sales increased 31% and 35% and retail units sold increased 6% and 16% in the Americas region in the three and nine months ended December 31, 2010 compared with the same periods in the prior fiscal year, reflecting strong sales of products with higher average selling prices and in particular, Logitech Revue. All product lines produced double digit percentage sales increases in both the three and nine month periods ended December 31, 2010 compared with the same periods in the prior year. Sales of the Digital Home product line were especially strong, based on the newly-launched Logitech Revue.

The launch of Logitech Revue and the associated peripherals contributed sales of $23.4 million to our new Digital Home product family in the three months ended December 31, 2010.

Marketing and selling expenses increased 43% and 46% in the three and nine months ended December 31, 2010 compared with the three and nine months ended December 31, 2009, primarily due to the addition of LifeSize sales and marketing personnel in December 2009, and variable demand generation activities focused on Harmony remotes and Logitech Revue.

The increased advertising and marketing spending related primarily to approximately $27 million of variable demand generation activities in connection with our Harmony Remotes and Logitech Revue, as well as other new product launches.

Consulting fees related to our development of Logitech Revue for Google TV also contributed to the increase in research and development expense compared with the prior year. Read more at www.sec.gov

See this Amp at http://bit.ly/gCgSut

Boxee Business Model & Box Subsidy

The article on Electronista had me thinking on Boxee’s business model. Triangulating the recent announcements on Boxee being integrated by Viewsonic &  Iomega and the aforementioned article – is Boxee looking to make money by selling boxes (or licensing revenue per box?)  Boxee needs a large deployed base something that Roku has achieved (over 1 million devices, 1 billion streams and counting) in order to have a profitable business especially if they are targeting subscription fees as reported in blog posts from early 2010.

Whether Boxee implements a subscription fee or not, scale is critical**. And hence a affordable box**. Subsidizing the box is tricky especially if Boxee is not manufacturing the box itself – it will introduce two levels of overhead – one by the ODM who is manufacturing the box (e.g. in China or Taiwan) – and second by device maker such as D-Link. Simply speaking both entities need to make money. Now Boxee could hire & staff to have a team work with an ODM directly … so those costs need to be factored in to the business model.

Needless to say the amount to be subsidized is critical which is directly proportional to the cost of goods, cost of the box. The current Boxee box by D-Link retails at $199 compared to the retails cost of Apple TV at $99. Comparing Boxee box to Apple TV is probably not right, in the case of Apple TV – they are balancing cost with feature set – for example Flash 10.x is not supported by AppleTV (which does put requirements both technical and cost on the hardware to be used). Plus Apple is vertically integrated – it is their chip (A4), and they are getting it manufactured at the most optimized costing (evidence of optimized costing and supply is evident in their recent quarterly earnings conference call where they disclosed that they are using cash to secure inventory, an excellent analysis done by Asymco can be found here).

It makes more sense to compare Boxee box with products from Roku and WD. Roku has currently three products, all probably based on chips from Trident (technically from  NXP, whose STB assets were acquired by Trident) – Roku HD (MSRP $59.99), Roku XD (MSRP $79.99), and Roku XD | S (MSRP $99.99). Western Digital (WD) has three products as well – WD TV Live, WD TV Live Plus, and WD TV Live Hub. The last one from WD, the TV Hub, includes a 1TB Hard Drive [this is also competitive to the Iomega with Boxee]. There is no difference in the MSRP for TV Live and TV Live Plus at $129.99 (actually as of this writing, the TV Live Plus is at a promo pricing of $119.99 on the WD website). The TV Live Hub has a MSRP of $199.

The boxes from Roku and WD both are capable of 1080p playback, in fact, in my personal experience the WD Live TV plus does a fantastic job of 1080p and 720p playback of many formats. Boxee switched from Nvidia to Intel and the reason cited was 1080p playback. And agreed there are several nuances to the flavors, bit-rates of HD – making the selection of main processor harder. I think Boxee failed to implement the MVP concept for the Boxee Box***  or the Jobsian product philosophy of what not to do. Roku introduced an absolutely no-frills box when they started out with only support for Netflix. I suspect though, it was support for Adobe Flash that made them switch to Intel and now switching to another platform would be difficult as indirectly admitted by Boxee’s CEO Avner Ronen on this blog post:

“Having both Boxee-based devices running the same system-on-chip is also making life simpler for us, since we can develop virtually identical firmware for both.”

Boxee, it appears is trying to be everything to everybody but in implementation it is falling in the segment of “Early Adopter, High Tech Enthusiast and requires a PhD”.  Take a look at their forums the diversity of requests being made is mind blowing. I believe Boxee team is occupied with features and functions more than benefits.  They have taken on a task in equivalence to what the GoogleTV is trying to accomplish without the resources.

There is no doubt that Boxee needs to reduce cost of Boxee-enabled boxes being deployed by its partners – and in order to do that, they need to drive cost by focusing on the most important features. May be do a re-start of their product? The very first thing to do is to with right feature set the right System on Chip (SOC). It is not just the SOC pricing, but the implications (and hence the cost) on the rest of the box design.

Secondly the subsidy flow has to be thought through, I believe it may be an opportunity for Boxee to flip subsidy model on its head. Traditional subsidies are complex, or at least complex to operationally manage. Take the example of cable companies such as Comcast or Time Warner – they source their Set Top Boxes (STBs) from the likes of Pace, Motorola, Samsung, Cisco. However the consumer pay nothing for these boxes. The STBs are subsidized in lieu of monthly consumer revenue. And there is a system in place to handle it on the company accounting books.

Boxee has a wonderful technology, and beginnings of a great platform. It is, however, a very crowded market. May be Boxee needs to enable their technology to be a platform for non-Video services in the Digital Connected Home?

** GigaOm’s Om has an excellent post on what makes an Consumer Internet company successful – and all three factors are important for Boxee.

***I argue that the Software only version and the Box implementation are two fundamentally different products. The Boxee Software Only model is similar to Microsoft Windows, and the Boxee Box to a significant degree following an Apple product model.

Netflix: Taking on the Cable Guys

Netflix, with +20m customers, has meaningful & significant subscribers. And I think it is getting to ready to use that muscle. They are a business, much like Google:

– With no original content from them – they license, aggregate and distribute
– With no network infrastructure, with zero investments in networks (but they do partner/pay CDN operators)

However they do have the power of subscribers to back them up!

Amplify’d from mediamemo.allthingsd.com

But you can summarize it in a sentence: If the broadband guys insist on gouging us to get video to our customers, we’re going to make a very public stink.

Hastings says the list will detail “which ISPs provide the best, most consistent high-speed Internet for streaming Netflix,” and offers a preview: Charter is tops, right now.

But if you invert Hastings’s description, you get what he really means: We’re going to tell some broadband customers that they’re getting screwed and should switch to a new provider. Heads up, Time Warner Cable, Comcast, etc. Read more at mediamemo.allthingsd.com

 

See this Amp at http://bit.ly/e5ohY5

Intel in the Living Room

Intel has been attempting to enter the living year for over a decade now – and finally it is beginning to happen.  Their dream has been for an Intel-powered CE device to be the center of the living room. They tried with the StrongARM line of processors right after their acquisition from DEC (late 1997). The StrongARM business was sold to Marvell in 2006. Intel, then followed by launching Viiv, to create an Entertainment PC for the living room. Sadly that effort also went nowhere …

Things are beginning to change. Intel is finally entering the living room – I can say this is true for my home and any of the households who have bought any of the following: the Boxee box, Logitech Revue, Sony GoogleTV products. All three of these are powered by the Intel 4100CE chip – code named Sodaville. The Sodaville chip has an Intel Atom processor.

The thrust is not only on the consumer front but also via service providers such as Comcast. There have been reports of Comcast running trials with a Set Top Box (STB) being powered by the CE4100 (you can read a review of the SOC by Anandtech).

The one thing that history does tell us in this case – Intel will not give up!

 

GoogleTV & Sony: Bad Marketing Combination?

WSJ and NYTimes recently reported on Google requesting partners to delay launch of GoogleTV products. May be the existing partners have also given up? The pictures below were taken yesterday showing the GoogleTV demo in the SonyStyle front display window at Atlanta’s flagship mall – the Lenox Mall.

 

GoogleTV product may be ready or not, having a front window display in a premium shopping mall that shows a cryptic error message with a blank screen furthers the negative image of Sony and Google.

 

 

 

Boxee & Its Remote Control

The Boxee box had been waiting its turn to be setup since I got it just before Thanksgiving. I finally set it up last week, and here is what you need to know:

1. The shape is different, unique. It is sitting there on my entertainment center – quietly, the Boxee icon glowing. The box design makes it a contender to remain on top of the entertainment center rather than being tucked away.  The ID may make for interesting conversations.
2. The size is certainly very small compared to the other boxes using the Intel CE4100 such as the Logitech Revue.
3. Setup was not too difficult – especially compared to the GoogleTV experience. It rebooted twice to go through the upgrade process.
4. Apps have to be added – these apps bring video content to you. Roku calls them channels.
5. The remote control is also unique. But it also happens to be the disappointment. It is an attempt to have a minimalist design like Apple’s remote gone bad. Here are some observations on the remote control:
   • The remote is NOT IR – good news because you don’t need to point it anywhere, it is RF.
   • The remote has two sides. One side is the Apple-remote style (btw the functionality is identical to that of the Apple remote) and the other side has a small alpha-numeric keyboard.
   • On the Apple-style side the buttons are centrally placed – and the only clue on what side is up is the Boxee logo. The Logo is placed at the lower size of the remote and hence decides the Up, Down, Right & Left keys of the remote. When you grab the remote – you need to make sure that you are holding it the right side up. I ended up pressing the wrong keys many times and a friend of mine had a similar problem.
   • The arrow keys – the distance on the pad is a tad bit too much. In the age of Smartphones and Apple Remotes – the thumb is used travelling only so much when you are trying to click the keys. I had to stretch my thumb in order to effectively click the keys.
   • Similarly having the keys placed centrally – you do not have enough room to hold on to the remote like you may on the Apple remote.

 

 

 

Roku Channels – A Smart Strategy

 

Last few months have brought an onslaught of boxes promising the best video experience delivered via Internet to the consumer home – GoogleTV, the new AppleTV, and Boxee. Roku, one of the veterans in this space, has also launched new models. I think within the Over The Top (OTT) video boxes – Roku has a very smart strategy – it has managed to marry the old paradigm of (TV) channels and the new model of Ala-carte TV watching (consumer gets to pick their channel). Netflix is what made Roku very popular but interestingly enough they have tons of  channels.

 

Roku allows content creators to package their own content and deploy it as a channel – paid or free. This is, at least from the perspective of Content Producers, good. Each content creator/producer has the flexibility to retain their branding and experience. It, of course, allows for making niche or long tail programming easier. Consumers get to pick the channels that they want to watch.

 

As a company they are focused – they are not trying to introduce applications for gaming etc. – the Roku devices are video-centric – and continuing to add content to their devices, making it a wonderful TV watching experience [e.g. just realized WillowTV is available, goodbye Dish!].

 

Power Consumption: AppleTV vs. GoogleTV

A simple experiment – plugged in the new AppleTV and two GoogleTV devices – Sony Blu-Ray Player & Logitech Revue one at a time in the Kill A Watt EZ. I measured the watts consumed while running a video application like YouTube and Netflix. Here are the results:

With Google TV:

Sony Blu-ray Player:    13.5 to 14.0 Watts, around 17 Watts when playing a DVD

Logitech Revue:           12.8 to 13.0 Watts, while playing Netflix or YouTube videos

AppleTV:                       1.7 to 2.0 Watts

Attaching pictures created from videos (as opposed to taking with my Canon 20D), slightly blurry, will update them soon.