Sunday, May 06, 2007

22 Months and Counting: What's Changed?

Once again, the 17th has come and gone, and it's now less than 22 months until the current "hard" date (2/17/09) on which analog broadcasting is supposed to cease. Actually, this recap is so late (blame my six yearly-recap posts) that the 17th will be coming around again not too long after it goes out. This is the 13th of 35 planned monthly recaps of developments affecting the various players (laid out in my first few posts) in this story. As I've said before, despite the name of this blog I do cover some stories (like the growth of HD) that are not directly transition-related (but strike me as being of interest to transition-watchers). Here's some of what happened (or was commented on) between 3/18 and 4/17. As usual, major news sources for this update include Multichannel News, TVPredictions.com, Engadget HD, TV Week, and TWICE.

THE PUBLIC - It's been two months, and I'm still a bit freaked out by that Association of Public Television Stations survey (the one which revealed that 61 percent of over-the-air viewers had no idea that the transition was going to happen). The APTS was one of the groups represented on a panel on the transition at the recent CEA (Consumer Electronics Association) Washington Forum, sharing the stage with representatives from the CEA, the National Association of Broadcasters (NAB) and the National Cable and Telecommunications Association (NCTA). Given the importance of the discussion, I thought you might like to see these three recaps (as each covers the panel a bit differently). Myself, I'm a bit concerned over how blase CEA President Gary Shapiro came across, especially his comment that "Less than 15% of homes will be shut out totally". OK, let's assume that everyone works hard and the figure on The Day is only 8%. In a nation of 300 million people, that's 24 million people. Is it realistic to expect them to take this gracefully? So, even though the CEA estimates that 28 percent of American households now own an HD set, let's not get complacent.

GOVERNMENT - Congress was busy with transition-related business recently. Everyone was eager to express an opinion on the rules for the converter-box program designed to ease the transition for analog TV owners, and on March 27th many congresspeople and other interested parties had a chance to air their views on that and other transition-related issues at a meeting of the Subcommittee on Telecommunications and the Internet. Democrats wanting more funding pointed to the large number of number of TVs needing a converter box (including extra TVs in cable/satellite homes), while Republicans countered with much lower estimates of those who would actually want coupons, estimates that indicate that current funding is more than adequate. Who's right? You can download a Windows Media file of the entire subcommittee hearing here, and judge for yourself. (Warning: it's 131MB, so you might want to stream it instead. It's also nearly three hours long, but if you can spare the time you'll definitely come away knowing a lot more about where the various players stand.) Among the witnesses at the meeting was Time Warner CEO Glenn Britt, arguing for cable's ability to convert DTV signals to analog at the headend (avoiding the need to lease set-tops to millions of legacy consumers). One good sign; Congresspeople on both sides of the aisle seemed committed to keeping the date, largely in response to a very compelling witness (a mother of a 9-11 victim) for first-responder concerns.

The FCC has been active as well. FCC Chairman Kevin Martin is now floating a plan for mandatory dual carriage of both analog and digital signals by cable systems unless all subscribers have the necessary DTV reception equipment. As expected, the National Cable & Telecommunications Association panned the plan. Also critical was DTV pundit Phillip Swann, while Ben Drawbaugh of Engadget HD saw some potential good in it.

Finally, the annual convention of the National Association of Broadcasters featured a speech by CEO David Rehr, reiterating their opposition to downconversion of broadcast HD to standard DTV, and accusing cable companies of planning to give their own networks an advantage.

BROADCASTING - After all the coverage of the retransmission issue over the last several months, it's surprising that I only have this one story of a three-year agreement between Charter Communications and Sinclair Broadcast Group. As usual, no one's talking about whether or how much cash was exchanged.

There was more news regarding the news in HD. In addition to the usual local conversions, NBC Nightly News also went HD. As expected, it's in the early phase of HD production (mostly studio shots and reports from the White House lawn), and it'll be awhile before we see a lot of HD location footage. Getting back to the local stations, here's some information on the newsroom tools and HD camcorders those conversions require.

There are some other stories relating to new HD. While I'm not sure how much of it we'll see here in the USA, it's interesting to note that the Vatican is going HD. What we can see here is the FOX networks, who are ramping up their HD sports coverage. Speaking of sports, the NFL recently OKed HD for instant replay

I've also got a few items of miscellany. With all the talk about recovery of the analog broadcast spectrum, I thought some of you might be interested in this article that explains in detail where the spectrum is going under current plans. This TV Week article looks at the effect (or lack of same) of HD on ratings. An area where HD definitely does have an effect is the vividness of action footage, as the producer/director of 24 testifies.

PROGRAM PROVIDERS - I have a bit more information on DirecTVs HD plans. As this article shows, DirecTV is planning to reach that number partly by counting multiple feeds of sports packages such as Sunday Ticket (13 channels), Extra Innings and other sports packages. They still say that they'll have 70-80 full-time national channels (which still means at least 60 more than they have now). One of those channels will be the new Tennis Channel. They're also planning to get into VOD, utilizing a broadband connection. And some of DirecTV's competitors (by which I mean Echostar and the NCTA) got to weigh in on the Liberty-DirecTV merger in recent filings with the FCC.

Surprisingly, not much news from Dish in this period (but I believe that will be different next time). What little there was wasn't good; they're not getting Extra Innings.

Comcast is certainly busy; they're about to begin an important experiment in one of their major regions, one that could help keep them competitive with DirecTV, and even surpass them. By July 1st, all analog set-top boxes in Chicago will be replaced with digital boxes, and expanded basic will be digital only (leaving 34 basic analog channels for customers without boxes). Comcast has told reporters that the new boxes will have capacity for 120 HD channels, though I'm not sure whether that's due to bandwidth reclamation, switched video or both. Speaking personally, I can't wait to hear their national rollout schedule on this one. They've also added Showtime VOD to their VOD offerings (good, I'm way behind on The Tudors). In a Boston-area initiative, they've teamed up with Circuit City to start a new electronics store called Connect, designed to offer customers a chance to purchase hardware and connect services at the same time.

FiOS continued on its expansion path, adding cities and getting some good news (Florida came closer to passing a franchise-reform bill). They also improved their competitive position in New England by adding NESN (not having to give up Sox games in HD will make switching this an easier decision for quite a few people). They've also added other channels elsewhere.

Things aare picking up on the U-Verse front; they've won a California franchise and influenced new Minnesota state franchising legislation. They've also added Kansas City as their 15th market, and strengthened their marketing with an offer of Free HD for a year.

Moving on to other providers, the larger cable systems got some good news - unlike Dish, they get to keep Extra Innings, and will get The Baseball Channel in 2009. But one cable company got some bad news - Cablevision lost a case regarding their Network DVR (basically a server that gives customers DVR functionality without having a box in the house). So apparently having the disk drive is OK in one place, but not in another. Don't you just love copyright law? Naturally, they're appealing. Looking at the other side of the franchise process, cities and counties are ramping up their challenge to streamlined franchising, challenging the FCC in three separate courts. There were some channel adds as well - Cablevision added Discovery HD Theatre and National Geographic HD, and Time Warner announced four additions - ESPN2 HD now, plus three other Disney channels (ABC Family HD, Disney Channel HD and ESPNEWS HD) once they launch next year.

HD NETWORKS -Surprisingly, there were only two new network announcements (Tennis Channel, see PROGRAM PROVIDERS above, and religious broadcaster TBN) during this period. While it's not a new network, a change in focus has turned INHD into MOJO. TV Week spoke to Robert Jacobson of In Demand Networks concerning the change. There were also an indications of a possible network to come - C-SPAN has produced an HD documentary called Capitol (it's for Comcast VOD, but who knows what it could lead to?). My next report will have many more new announcements.

There's news from existing networks as well. Several had new programming announcements, including National Geographic Channel, the Voom family, Discovery HD Theatre and ESPN. A different picture was in effect at FSN, which has Pittsburgh hockey fans upset over their lack of HD Penguins coverage. Happier viewers helped power Discovery's new Planet Earth to the kind of ratings success that recently eluded Atlas.

MANUFACTURERS - The effect of current and upcoming federal mandates leads off this section. The big enabling product that everyone hopes will smooth the transition is the digital-to-analog converter, and we now have some solid pricing from one manufacturer. The most recent mandate to go into effect was the March 1st implementation of the final phase of the FCC tuner mandate, and I continue to track the slow death of analog TV (at least one more post to go). The mandate covers everything with a NTSC tuner (not just TVs), such as this new ATSC DVD recorder from Sony. And what would a mandate be without a waiver request? Bathroom fixture king Kohler wants one (to last through 1/1/08) so it can include old-fashioned analog tuners in its bathroom mirrors. Wow. Hmmm, perhaps this is why leading portable manufacturers like Coby have yet to announce any ATSC portables? Now we turn to the next mandate coming up, the July 1st ban on cable set top boxes with integrated security, which in practical terms means mandatory CableCARD devices. While manufacturers of CC STBs are gearing up for July 1st, higher-than-expected HD-box demand is causing shortages as cablecos run out of their last shipments of non-CC boxes.

In the NextGen DVD war, this was a month to remember that it's not over just yet. After a string of good news for the Blu-ray camp, Toshiba hit back with significant price cuts, and the HD DVD Promotions group let us know about a flood of new discs, plus figures showing that sales of standalone HD-DVD players have passed 100,000. And if you were shopping at Amazon, you could snap up a player for a mere $305(or you could have gone the other way and picked up Samsung's original Blu-ray player for $499, the same price as the entry level PS3 that Sony just discontinued. There were other hopeful signs; for the moment, European studios favor HD-DVD, and now Samsung has announced a combo player that will support HD-DVD properly, unlike LG's model. Hopefully the price premium won't be as large, either.

When it comes to American disc sales, though, things were looking much better for Blu-ray. Figures for the week ending 3/18 showed that 9 of the top 10 titles were Blu-ray, with the runaway champ being Casino Royale, the first NextGen DVD to ship over 100,000 units. HD DVD fans do have the small consolation that they will get The Matrix Trilogy first. There are some new studio announcements too. While HD-DVD has gained the support of First Look Studios, a new firm will be opening Blu-ray to the indie film world.

While the PS3 has been a big boost to Blu-ray, the reverse is hardly the case. According to these sales figures from February from the NDP Group, PS3 has trailed both Wii (the surprise leader) and XBox by a wide margin. Perhaps part of this is simply the satisfaction of the original pent-up demand, but another part of it has to be that a lot of gamers (especially those without HDTVs) simply don't see the value in the additional expense (especially now that Sony has canned the entry-level model). Perhaps these figures will lead to price cuts soon. And perhaps his will once again benefit Blu-ray more than it does the PS3 itself. Surprisingly, this has not stopped Microsoft going the same route with its new XBox 360 Elite, charging $480 for to give customers more storage and the ability to download HD content (rather than integrating their HD-DVD add-on). I know the megatrend in entertainment formats is away from physical objects and towards the purely digital, but I can't help but wonder if this particular product is just a little bit ahead of the adoption curve. Or is it because Microsoft is moving away from HD-DVD?

One last piece of good news for Blu-ray fans, there will be hardware inprovements (and we're talking about the basic spec, not any particular product) after October 31.

But as I said a few paragraphs back, it's not over just yet. In fact, in some ways it's barely begun. NextGen rentals through NetFlix represent only 1% of their business. And at least one prominent Hollywood executive (Jeffrey Katzenberg of Dreamworks) believes that the real winner in the format wars will be nobody. I'm not sure if that's true in the long run, but I can see his point. To repeat something I said in my one year Manufacturers recap we need to remember that though VCRs thrived in the middle of a long-running format war, those machines were delivering completely new capabilities (time-shifting and watching of pre-recorded material) to customers, and that's simply not the case this time around. Even the victor doesn't always win in the long run - remember when LaserDisc looked like "the future" after having outlasted RCA Selectavision (which itself sold 16.4 million discs back in the 80s)?

In other hardware news, the hangover from the big HD holiday buying frenzy continued to bring more misery to retailers during this period. As a consequence, Tweeter is shrinking and redefining itself and Circuit City's response actually includes laying off its best-paid sales associates and replacing them with people willing to work for as low as $8 an hour (that'll sure improve our buying experience, I bet).
In contrast, Best Buy seems to be doing just fine. Also taking a hit are plasma TVs in general, whose dollar volume dropped 16% year-to-year, largely because large price drops did not increase unit volume enough to offset the lower prices.

We'll close with a look at the next "next big thing" in display technology, OLED. With eye-popping specs such as a 1,000,00:1 contrast ratio and unheard-of thinness, the first actual product, an 11" HD set (smallest I've ever heard of) is scheduled from Sony this year. Looking further ahead, here's an example of what's in the works.

And that's all I have at this moment!

EDIT (5/11) - Clarified the fact that the Comcast analog-box elimination experiment is occuring in Chicago.

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