Sunday, March 02, 2008

12 Months and Counting: What's Changed?

Once again, the 17th has come and gone, and it's now less than 12 months until the current "hard" date (2/17/09) on which analog broadcasting is supposed to cease. This is the 23rd of 35 planned monthly recaps of developments affecting the various players (laid out in my first few posts) in this story, meaning that we have gone just about two-thirds of the distance that remained when we started this blog in March of 2006. 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). That said, here's some of what happened (or was commented on) between 1/18 and 2/17 (with one big exception - see the MANUFACTURERS section below).As is usual, major news sources for this update include Multichannel News, Engadget HD, TV Week, TWICE and TVPredictions.com.

THE PUBLIC - A new round of surveys came out regarding public awareness of the transition, and the results were mixed at best. Let's start with the good part; more people have heard about the transition. According to a National Association of Broadcasters (NAB) survey, 79 percent of us have seen, read or heard something about it. Sounds pretty good, but there's a catch. As the old saying goes, "It's not what we don't know that's the problem, it's what we know that ain't so", and a lot of what people are taking away from what they're seeing, reading and hearing is, in fact, not exactly so. According to this new Consumer Reports study, over half of those who are aware of the transition believe that all TVs will need a converter box, and nearly half believe that only digital TVs will be able to function after the switch. Of course, it doesn't help matters that (according to this study from the public-interest group U.S. PIRG) most retailers aren't giving out correct information, particularly concerning the coupon program. If the right information doesn't get out there, millions may end up wasting money on converter boxes they don't need (because they have a cable or satellite subscription) or a new TV they don't need (yet). On the other side of the coin, it seems that many who think they are covered, aren't. So as the NAB prepares to broaden its efforts, let's hope it keeps in mind the fact that quality of information is at least as important as quantity. This would also be good advice for the Telemundo network as it launches its Alerta Digital campaign, especially in light of recent Nielsen survey findings that point to a much greater potential impact in the Hispanic community than in the overall population.

One thing I would have expected to happen, didn't. I was expecting to see a bit more media attention paid to all this on 2/17 - perhaps I just wasn't watching the right newscast. The Boston Globe did have a piece, but in the Business section, and mostly dealing with what stocks might benefit. I guess this still isn't real news yet.

GOVERNMENT - Given just how far we have to go (see above), it's no surprise that many in Congress want to see a more aggressive federal effort. People have been calling for more funding for awhile now, and the president's 2008 fiscal does propose an increase in the FCC's public-outreach budget, from a microscopic $2.5 million to $20 million - I guess they could always buy a few Super Bowl ads with that. No surprise that the chairman of the House Energy and Commerce committee isn't exactly bowled over. What Chairman Dingell (as well his Senate counterpart Daniel Inouye) would like is a transition task force to co-ordinate the government's response. Beyond that, this Multichannel News article suggests a willingness to consider legislation to correct shortcomings.

We mentioned last time that the converter box program was underway, and the process has been gathering momentum since then. People have been able to apply for coupons since Jan 1st, but the boxes haven't been available (or the coupons mailed) until just recently. That all changed when the National Telecommunications & Information Administration (NTIA) announced that boxes would be available by February 18th, and in fact both Best Buy and Wal-Mart confirmed that they would have them by then (this articleon the program's official "kick-off" event also lists Radio Shack as a vendor). While Best Buy's house-brand Insignia box goes for $60 ($20 after applying the coupon), Wal-Mart is featuring a $49.87 Magnavox model (less than half the cost of the Insignia after applying the discount). I'm not sure who's going to end up selling those $40 (effectively free) Echostar boxes I mentioned last time. Thanks to Engadget HD for pointing me to afterdawn.com's complete list of eligible boxes. Astonishingly, one group of people who apparently won't be eligible for coupons is nursing home residents - elderly people whose old analog sets may be one of their only sources of companionship and affordable entertainment, but who are not included in the program's definition of "household". Thanks to stopsnow.rcrg.info for pointing me to this story (originally from newsobserver.com, but I can't find it on their site - here's an update).

Another effort under way is auction for the 60MZ of spectrum in the 700MZ band - the old analog TV frequencies. There's already been over 100 rounds of bidding, but we may not actually know the winners until summer. As of Feb 7th, bidding had already exceeded the $10-15 billion the government was expecting. The FCC maintains this page devoted to the auction, and the various links therein lead to far more data than any sane person would want to know (except for the most interesting part - who is bidding for what - which they don't tell you). Thanks to the Webb Alert video podcast for tipping me off to this, as well as to this Robert Cringely article which attempts to make this extremely complex process comprehensible to us mere mortals.

While certain things are progressing, one thing I thought had been checked off the to-do list may be in doubt. Previously the FCC had addressed the needs of analog cable viewers by mandating that cable systems continue carrying an analog version of local broadcast channels for three years after the transition (unless they had already bit the bullet and converted to an all-digital system), This, however, was hardly to the liking of national cable channels concerned about whether this would leave room for their signals (especially on smaller, bandwidth-strapped systems, who have found an ally in Sen. Ted "Series of Tubes" Stevens of Alaska), and now they've filed a lawsuit to overturn that rule. The National Cable & Telecommunications Association (NCTA) will abide by the rule (regardless of the legal outcome), but intends to lobby for a broad exemption for those smaller systems mentioned above. Given cable's reaction to this rule, it would be interesting to see what the reaction would be if other initiatives by FCC Chairman Kevin Martin (such as multicast must-carry and now his new idea of low-power must-carry) became mandatory and further limited the available bandwidth (we already know that the NCTA considers the low-power initiative to be a very bad idea. (The reason we are hearing about regulatory relief for Class A low-power stations now is that they are not required to go digital in 2009, and their largely over-the-air audience will disappear as they install converter boxes that do not include analog tuners.) Speaking of the three-year analog mandate mentioned above, a recent attempt by Comcast to partially circumvent this by moving public/educational/government (PEG) channels to digital-only in Michigan was a public-relations disaster that in the end led Comcast to apologize to Congress.

One problem the FCC (or at least Chairman Martin) doesn't seem to be interested in addressing is one that may affect those over-the-air viewers who do know about the transition, have gotten themselves a digital receiver, but may be too far from the signal tower. These are the same people who may be used to snowy reception now, but with digital's all-or-nothing reception, they may well end up on the "nothing" end of the scale. A study by market research firm Centris finds this to be a serious problem, but so far Chairman Martin is siding with critics of the study's methodology. Who's right? This will bear watching.

Just a couple more items here. The FCC has published its December-approved rule forbidding any cable operator from reaching more than 30% of cable households, and Comcast (clearly the intended target) will (as predicted last time in this section) be taking legal action. I've mentioned before that Chairman Martin is pursuing cable on many fronts, and Rep Anna Eshoo (D-Calif) seems to have noticed this as well. I've also mentioned my belief that this stems from cable's resistance to a la carte pricing, so I thought it would be interesting to take a look at where fellow Commissioner Michael Copps stands on the issue (he appears to still be making up his mind).

BROADCASTING - For the most part, things continued as normal in this area. Another handful of local stations converted their newscasts to HD (the current total being somewhere around 70) - here's an example. There were other examples of new HD content as well, as WWE transitioned their entire schedule in the course of a week, from broadcast (Smackdown on The CW - though not for long) to cable (RAW on USA, ECW on SciFi) and pay-per-view, spending $20 million in the process. Telemundo has acquired rights to Brazil's first HD telenovela Dance, Dance, Dance. Even the slow-moving transition of syndicated programming had a bit of news, as Everybody Loves Raymond will be available (to those stations properly equipped) on March 17.

When I first started watching HD back in 2003, I would read about all the local stations that had yet to put a digital signal up, but I had sort of assumed that that situation was far in the past by now. Wrong! I know that a bunch of stations had been issued waivers years ago due to the expense, but I had no idea that there were still stations just coming online.

I've mentioned (both in the recap and in these two posts) the problems stations running the PBS HD Channel (the national DT2A feed of HD/WS-only programming that people have been using to show off their sets for years) have been having in carrying the new HD version of The NewsHour with Jim Lehrer, which is carried on a different feed. I was thinking of revisiting my research for this update to see which stations have made progress, but it's kind of irrelevant now, for two reasons. First, this comment from "jimbob" shows that PBS is in fact adding The NewsHour to the DT2A feed in May. Even more significantly, the PBS HD Channel itself is not long for this world. Thanks to Engadget HD for pointing me to this article from Current, which among other things reveals that PBS will be trading in the channel sometime this fall for the solution used by the other broadcast networks - a simulcast combining HD/WS programming where available with upconversion for the rest. So if you have some favorite PBS HD shows that aren't on the regular PBS schedule, you might want to consider saving them for posterity. I didn't, and just in the last few days WGBH in Boston dropped the PBS HD Channel and replaced it with a simulcast of their regular channel.

PROGRAM PROVIDERS - This is another where most of what happened represented a continuation of earlier trends. DirecTV's competitors continued to do what they could to add HD channels. For example, Comcast added two of their newest aquisitions (SciFi and Animal Planet) in Boston, and six in Seattle (those two plus Discovery Channel, TLC, HGTV and Food Network), and various adds all over the place. Their competitors (most notably Time Warner) did likewise.

But there's only so much of this they can do before they run out of room - unless they implement some new technology. In this Q&A, Cox's Steve Necessary discusses various plans (after first pointing out that selectivity can help offset mere tonnage). As mentioned last month, Comcast is hoping to deflect attention from all that tonnage by emphasizing their HD VOD selections, and they are now offering up some details. How well will this work? Personally, I think this kind of strategy will work better with the customers of the future (who will have grown up with VOD as a basic part of their viewing) than it will with the customers of today, who I suspect just want more channels. Which is probably why, even with all the talk of "choices", Comcast is planning to get up to the 50-60 channel mark in "typical" systems by years' end (by comparison with today, my local system has 34 HD channels, and we are probably a bit better than typical). I know they've made claims that haven't panned out before, but note that they are talking to their investors here - you have to be careful with what you tell those people, as they're apt to sue if they think they've invested under false pretenses.

One of the options we've mentioned in our ongoing discussion of bandwidth-maximization methods is to eliminate analog altogether, in contrast to the chipping-away method most providers use at the moment. The latest report of this comes from Chicago, where RCN has done just that. no surprise as to the location - Comcast has provided cover for them by doing the same thing back in July.

Another trend that just keeps on going is the expansion of the telco services. U-Verse reached 231,000 subs by the end of 2007, and now FiOS has reached the million mark. Success can bring problems, though - FiOS has run short of HD boxes!

HD NETWORKS - Another fairly quiet month. We did have one launch, as Speed debuted on Feb 7th. A couple of existing networks made plans to increase their HD content, as The Weather Channel prepared for a June 2nd launch of its HD studio and ESPN announced yet more games in HD. There was a channel announcement, as Hallmark Movie Channel set an April debut. And while they aren't launching a linear channel yet, IFC (one of my personal most-wanted) has launched an "HD" (so far it's WS upconverts) VOD channel to premiere its original series and anime.

Multichannel News recently ran a series of eight HD channel profiles, taking a look at their experiences and plans. Here is the intro, and the individual profiles for Mojo, ESPN, National Geographic Channel, Speed, Big Ten Network, Wealth TV, Discovery and The Weather Channel.

MANUFACTURERS - I began this section last time with the observation that "when it's time for something to happen, it can happen with head-spinning speed". That continued to be demonstrated in the last month, as the HDM (short for High Definition Media, what I've been calling NextGen DVD) format war reached its Appomattox two days after our close. So let's look back on that tumultuous time right now (since this is essentially the end of the story, I'm going to drop the usual date-range limitations altogether this once and bring the story up to where it stands now).

Things looked pretty dire back on Jan 17th, but some still believed that all hope was not lost, even after the Gartner Group study that called recent HD DVD price cuts "useless resistance", or the NDP Group figures that showed Blu-ray grabbing 93 percent of player sales the week after Warner announced its intention to go Blu-exclusive after May (and stand-alone players were HD DVD's greatest area of strength). Still, most observers on Jan 17th probably agreed with Crave's Ian Morris when he answered the question "Can Anything Save HD DVD"? by saying "it seems pretty unlikely", or with CNET's Charles Cooper, who wrote the next day that he didn't care who won, as long as it was over.

Still, Toshiba was not prepared to give up just yet. HD DVDs last campaign began with the above-mentioned price cuts, which with a further Amazon discount took the price of a Toshiba HD-A3 down to $129.95 on Jan 18th. And at first it seemed to be working, at least a little bit; player sales rebounded to 28% (measured in units) and disks came back as far as 26% (not far from their historical range). And at least one of the HD DVD-exclusive studios (Universal) was quick to point out that it wasn't going anywhere. As mentioned last time, the head of the HD DVD Promotional Group is Universal's Ken Graffeo, so no big surprise there. This BetaNews interview(thanks again to Engadget HD) gives a look at what Mr. Graffeo was thinking in late January.

But the centerpiece of the campaign was to be a Super Bowl ad, which was supposed to focus on the advantages of the format. Unfortunately, the ad as aired was a crushing disappointment. Rather than trying to make its case against Blu-ray, it simply pointed out that it was a good complement to your HDTV. The closest it came to making that case was the end, where it flashed the new HD-A3 price and some retailer logos for a couple of seconds. On top of that, it turned out to be a regional, not a national buy. Even worse, it aired in SD!

After that, all the news was bad. As another NDP Group study showed growing consumer interest in Blu-ray, various small studios began to go Blu-exclusive (as had National Geographic earlier), the gap in available titles grew wider and Warner made clear that only in special cases would they be willing to supply their existing HD DVD titles to retailers after May. And disc sales percentages fell back below 20%.

But much worse was to come. February 11th was a very bad day, as Netflix announced that they would phase out HD DVDs over the course of the year, and Best Buy announced that they would actively promote Blu-ray as the "right solution" in high-def media. Even the HD DVD Promotional Group had to struggle to find the tiny little bit of positive news in all this (that being that Best Buy would still stock some HD DVD products). However, an even worse day was near. On Feb 15th, Wal-Mart (the nation's largest retailer) announced it would go Blu-exclusive by June.

This was on a Friday, leaving the weekend open for speculation. Reports that Toshiba might be ready to pull the plug were circulating even the day before the Wal-Mart announcement, and understandably accelerated the day after, with reports quoting company sources (but not official spokespersons) that it really was all over. Monday the 18th was a holiday in the USA, but business as usual in Japan, where the decisions were going to be made. While Toshiba first stated that no decision had been made, the statement was definitely of the type we remember from just before Warner defected, and the Japanese stock market reacted accordingly, sending Toshiba shares soaring on anticipation of an imminent end to the bleeding. The market got what it was looking for the next day, with Toshiba's official announcement that they would abandon the format by the end of March (see an account of the press conference here. This was followed two days later by confirmation that Onkyo was doing likewise (haven't heard yet about Venturer - which like Onkyo bases their HD DVD hardware on Toshiba designs - or those cheap Chinese players that were supposedly coming). A few days after that, Microsoft stated their intention to cease manufacturing their HD DVD add-on drive for the Xbox 360.

With the main hardware sources giving up, it didn't take long the remaining studio supporters to adjust to the new reality. Universal announced support for Blu-ray within hours of Toshiba's announcement, and Paramount followed suit the next day. It's taken a bit longer to get some clarity on the matter of how long HD DVDs would continue to be released. While Warner quickly reaffirmed their previously-stated intention to release HD DVDs until May 31st, it took Paramount/Dreamworks until Feb 28th to announce that its March 4th releases (Things We Lost in the Fire and Into the Wild) would be their last. This means no HD DVD versions of Bee Movie, Sweeney Todd or There Will Be Blood. And Universal's HD DVD plans are still undecided.

So that is what is left of HD DVD as of this writing. Some old hardware remaining to be sold (the HD-A3 that seemed such a bargain at $200 is going for $99 at Amazon with the description "Upconverting DVD player with HD DVD playback"), a few more disks to be released and one confirmed manufacturer going forward - LG, who for the moment will not be pulling their combo players. More on the mopping-up operations next time. Until then, those wanting to take one last look backward at the format war may enjoy Ben Drawbaugh's compact timeline covering the entire story.

Looking ahead, the story will be that of the struggle of HDM (represented by Blu-ray) to win over the masses from their DVDs (increasingly being played in upconverting players that may well be good enough for many, if not most). As I mentioned last time, it is not clear yet whether Blu-ray will be the real successor to DVD, or the new high-end format for videophiles (as was laserdisc in its day). So far, comparisons between the early days of HDM (both formats) and DVD are mixed, with HDM even-to-ahead when measured by player sales, but lagging behind on the discs themselves. Nevertheless, studio chiefs are looking to the recent HDM unification for the shot in the arm the business needs, given recent DVD sales erosion. And just in case you've forgotten, plucky little HD VMD is still out there (who would have thought they could outlast HD DVD?), but I have trouble believing they have ambitions beyond being a niche market player supported mostly by foreign software and appealing to those who are interested in same.

We'll finish up this month with a few pieces of other hardware news (I get the feeling this section is going to be a lot shorter in upcoming months). Toshiba and Panasonic have teamed up to solve a technical problem limiting the lifespan of OLED displays. For those interested in Panasonic's overall HD plans, this interview sheds some light on them. And there are reports that TiVo will be killing off the Series 3 in favor of the newer TiVo HD.

That's all for now!

4 Comments:

At 3:44 AM, Anonymous jimBOB said...

Thanks, Bob, for another comprehensive post. I don't know how many other readers you have, but I certainly appreciate the effort you put in.

I was at first slightly disappointed to hear that PBS will be killing PBS HD; if you switch on during the weekday PBS HD is often the only HD broadcast you get on OTA. Still, I can understand why they are consolidating on a combo SD/HD broadcast. My local PBS affiliate multicasts 3 SD and 1 HD channel on their DTV signal, and the overcompression really shows on the SD stuff, with quick dissolves collapsing into pixelation. Maybe if they remove one of the SD streams (as they will be able to do once the main channel combines with their HD channel) this won't be such a problem.

I must say I'm glad to see the idiotic DVD format war over. They've only been shooting themselves in the foot with this refusal to settle on a standard format. Last summer when we got our first big HDTV, I looked at Blu-Ray and HD DVD, and elected not to get either, since I didn't see the point of dropping a good chunk of change on what might soon be obsolete equipment. It remains to be seen if Blu-Ray will be able to unseat standard DVD as a the recorded format of choice.

WRT the public's confusion about the transition, I can't say I'm all that surprised. The DTV awareness spots I've seen are pretty mediocre, containing lots of swirly graphics and little hard information. Instead of even trying to put across many of the important information points that need to be publicized, the spots throw off a few vague statements and then punt by telling people to go to a website. I think if they could put together a 60-second version with simpler graphics that actually contained information, they'd get a lot further (the older technophobes who are a large part of the current OTA audience aren't going to go to any website).

 
At 7:40 AM, Anonymous Anonymous said...

Unless I am missing something, I don't understand the cable companies' beef about maintaining analog service for a few more years. They seem to complain that it will use up too much bandwidth, but the fact is that most systems ALREADY are providing a full HD signal, a downgraded SDTV signal (for those with digital sets but not paying extra for HD), and an analog signal (for the legacy "cable-ready" TVs) for most of the channels they carry they carry. (At least for the several dozen channels they make available on the "standard" cable level.) So, how is it that they claim they will have to use MORE bandwidth once the analog shutdown occurs? Seems to be it will just be status quo -- if they are doing it now, they can do it for a few more years.

 
At 2:07 PM, Anonymous jimBOB said...

Anonymous

For cable providers, it's not as simple as just "providing an HD signal." Each channel they provide requires x amount of bandwidth, and HD channels are bandwidth hogs, as are analog channels. The big push right now is to provide more and more HD channels, especially since the satellite providers carry a large number of HD channels. Thus cable providers are in a crunch, maxed out on bandwidth yet requiring more HD channels to stay competitive.

Eliminating analog is a way out of the dilemma. Since SD analog channels use up more bandwidth than SD digital ones, they can make room for the demanded additional HD channels by switching more and more of their analog offerings to digital-only. Eliminating analog altogether would yield even more bandwidth real estate. This is why cable providers are itching to dump their analog service - it's the only way they can keep up with satellite in the HD race. (Satellite was all-digital from the get-go, so they don't face any transition issues.)

 
At 7:03 PM, Anonymous Ron Johnson said...

Bob,
Thanks for your work putting this excellent summary together.

As I live in Chicago, and have Comcast service, I'd like to point out that MCN's story in regard to RCN is not quite accurate, at least where I live. About 20 'basic' channels remain in analog.

As an owner of a HD DVD player, I'm not really surprised that the format lost, but as you point out, it happened very fast. I use Netflix, and I'm rather disappointed in their aggressive move in this regard.

 

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