Saturday, May 31, 2008

Nine Months and Counting: What's Changed?

Once again, the 17th has come and gone, and it's now less than nine months until the current "hard" date (2/17/09) on which analog broadcasting is currently scheduled to cease. This is the 26th of 35 planned monthly recaps of developments affecting the various players (laid out in my first few posts) in this story. 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 4/18 and 5/17. Major news sources for this update include Multichannel News, Engadget HD, TV Week, TWICE, Broadcasting & Cable and TVPredictions.com.

THE PUBLIC - Since I've been doing these monthly updates, this section has relied on a multitude of surveys to try to get a bead on the public's knowledge and readiness for the changes to come. But soon we're going to get information of a more direct nature, as Wilmington, N.C. becomes the nation's first transition test market, with all major stations (except for public station UNC-TV) turning off their analog signals on September 8, less than four months from now. Being neither a large urban area or rural and isolated (and with a smaller-than-average percentage of over-the-air viewers), this small city should have an easier go of it than many other areas (even given that they'll have less time to prepare). So smooth sailing here should not be cause for too much complacency, while any significant problems ought to be taken as a major wake-up call. As I mentioned in my May 8th post, I'd like to see at least one large city do a test like this, and now that I think of it a test in a rural area further from the transmission towers might be useful as well. We'll keep checking back on this one.

Smaller, more modest tests were also announced. Eleven Florida stations are planning a joint series of three several-second blackouts (only seen on the analog channels) accompanied by information on how to avoid a permanent blackout. They were beaten to the punch by one Las Vegas station, which has already done something similar (link via Engadget HD).

While most stations aren't conducting tests, they seem to be flooding the airwaves with "Are You Ready for DTV?"-type ads (remember, these will become even more frequent starting in October). But there are still other things that could be done to get the word out, and the National Association of Broadcasters (NAB) thinks that its high time that the President himself got involved.

GOVERNMENT - As we've been doing lately, we'll start off with news of the most visible transition-related government initiative, the converter-box program. Last time I mentioned that the new head of the NTIA (National Telecommunications and Information Administration) had stated that they had mailed out about 6 million of the 33.5 million coupons the current program calls for. Now we have news from the Commerce Department that over one million of these have been used. Given that these coupons expire in 90 days, it would seem that a lot of coupons need to be cashed in posthaste. So what happens to those who procrastinate? Can they reapply? Right now, the NTIA refuses to say whether or not they can.

There was news concerning other government mandates as well. Last July, cable companies had to start using CableCARD-enabled set-top boxes (in order to separate security functions from the rest of the hardware in the box, thus allowing third parties to offer alternative boxes that could work with cable service). This coming July, it's the telcos' (e.g. Verizon, AT&T) turn. Meanwhile, an appeal by Comcast to exempt certain of their boxes from the existing mandate was rejected by a federal appeals court. Also having business before an appeals court were six cable programming companies urging the court to overturn the FCC mandate requiring cable operators to provide both the analog and digital signals of must-carry stations (unless the provider has switched to all-digital) after the transition (currently for three years, with extensions possible). This, of course, because additional bandwidth given over to analog signals reduces the bandwidth available to their own channels.

In other government news, the ongoing dispute between FCC Chairman Kevin Martin and both Congress and the cable industry continued on. A Senate committee rebuked the FCC over recent rules allowing concentration of media ownership in the same market (i.e. the extent to which broadcasters and newspapers can own each other in said market), and Rep. John Dingell's (D-Mich) investigation of Martin's management practices could be headed to a hearing in June. Meanwhile, Chairman Martin stands firm on one of the most contentious issues between him and the larger cable companies, that of a la carte, and has a new idea (based on the rates that cable networks charge per customer) that could shrink the size of expanded basic tiers. (I specifically mention larger cable companies as being in opposition because smaller companies with less bandwidth are more receptive to gaining the ability to cherry-pick just the most popular channels from distributors that currently offer them in bundles with less-desired ones.)

One more group with business before the FCC was the film industry, who are petitioning the FCC to lift the ban preventing cable and satellite companies from disabling customers' analog outputs when playing their protected content, offering earlier VOD release dates as an incentive.

BROADCASTING - While the conversion of local newscasts to HD had slowed to an inexplicable crawl last time, it was a very different story in the last month, with nine new additions by my count, bringing the total up to about 90. Others are prepping for the change later this year. But it's one thing to have your studio broadcasting your snazzy new set in beautiful HD, it's another to get your location crews set up to actually send you HD from the field. The slowness of this conversion-within-a-conversion is partly related to the need for new microwave equipment, as explained here. Field cameras are also an area that has been slow to change, but the pace is accelerating. There were also developments on the national Sunday morning news front, with ABC's This Week going HD and Fox News Sunday expected to follow suit in August (it's currently shot in widescreen SD, though some have mistaken it for HD). NBC's Meet The Press will be going next year, but no plans have been announced for CBS's Face The Nation.

News is not the only area of broadcasting where programming is converting to HD - the syndication market got a big boost with announcements regarding Entertainment Tonight and its sister show The Insiders (going in September) and The Ellen DeGeneres Show (starting Monday, September 8th).

The most recent edition of National Association of Broadcasters' NAB Show was the last of the analog era (assuming the current dates remain in place), and while trying to snap up any remaining equipment they need to finish their transition implementation plans, many attendees were already looking past the transition to new areas of interest such as mobile DTV. For the sake of comparison, note that analog isn't going anywhere soon in Taiwan, where HD is still getting off the ground.

Back in November, I posted info about HD transmissions from the moon (via Japan's KAYUGA satellite), even though thats not quite "broadcasting" in the sense we use here. Anyway, I thought you might want to see the latest batch, which are even cooler.

PROGRAM PROVIDERS - More continuity than change this month, as various providers continue to bring their lagging markets the channels previously seen in high-bandwidth areas, resulting in double-digit additions in places like the Oregon/SW Washington area, Panama City, Florida and Northwest Arkansas, among others. For those Comcast markets that were already up to date, the most common additions were the trio of Disney, ABC Family and Science Channel (the latter being the only one that I have high HD-experience expectations for in the near term). However, this good news doesn't apply to everyone - there are still towns out there with no HD at all.

But these expanded lineups pale before those currently available on satellite, with DirecTV currently having the lead. Competitor Dish Networks briefly attained parity (95) in national channels by adding 22, a fact which they announced with a press release. And it was actually true for the few hours between the time they added the new channels and the time they removed first 10 and then all 15 of the VOOM channels (after earlier moving VOOM to a less-popular tier) . Oddly enough, the fact that they now only had 80 HD channels was apparently not considered to be worth a press release of its own.

I guess that's the sort of thing that can happen when you're under the gun to increase capacity (Dish is on record as attributing slow subscriber growth to their less-robust HD offering). With another DirecTV satellite supposed to be operational around September, the pressure is just going to get worse, even though Dish has more satellites going up this year and others scheduled as far out as 2010. Cable and telco providers have even more severe problems in that area, as they can't just add capacity at will via new satellites. Yet the need to expand both linear channel and HD VOD capacity is undeniable, as providers trumpet their success in signing up more and more HD customers. This Multichannel News article takes an extended look at the tools (SDV, analog reclamation, MPEG-4, etc.) many providers are using or planning to use in the near future. As an example of one of those methods, Cablevision is doing some analog reclamation in May and June (Comcast will be doing some here in New England in mid-July). In addition, Verizon continues to eliminate analog altogether (as was mentioned last time), doing so in Massachusetts on May 12.

That was not that hard for Verizon, which has been primarily a digital provider from the beginning. Eliminating analog for companies with a large base of change-resistant "legacy" customers will be a different matter entirely. Years and years of relentless marketing have finally put digital cable customers in the majority, but many millions are still holding on to their good old it-aint-broke service. How to get those folks to come over without alienating them forever (once you have to have an STB, you might just start to think about whose STB you'd rather have)? One way is to make the transition as invisible as possible. A few months ago I mentioned that Comcast was interested in a cheap DTA (Digital Terminal Adapter) that would not require a box. Plans seem to changed a bit in the meantime, as they (among others) seem to have settled on a DTA that will come in the form of a bare-bones box similar to the converter boxes for over-the-air viewers (but with a cable tuner instead on ATSC tuner). It's still a box, but is designed to come as close to the analog experience as possible. We'll see how that one goes over.

We always have some legal matters to report between various providers. Comcast and AT&T have been getting into it in the Chicago area, with AT&T alleging false advertising (implying that many more U-Verse customers would have to put with large utility boxes on their property than is actually the case) and Comcast countersuing over alleged network interference due to faulty U-Verse installs. Comcast is also suing the municipal utility in Chattanooga over their competitive fiber-to-the-home product, alleging unfair advantage and a proposal that does not accurately state costs that would have to be subsidized by the ratepayers.

One thing digital technology has done has been to open the market for video services to companies other than the traditional providers. Apple, for instance, who recently announced the ability to buy movies on iTunes on the same date as their DVD release, as well the ability to buy movies directly on Apple TV (previously, you could only rent, with purchased movies having to be synced from ITunes). iTunes is also adding other content, such as shows from BBC America. Another non-traditional player is Amazon, whose Unbox service will be able to deliver HD content to broadband-connected TiVos "in the not too distant future". Even the PS3 is getting into the act, with a video download service that could start this summer. Finally, a new startup called Sezmi is planning to offer a service cobbled together from over-the-air, IPTV and Web video content, which it plans to offer through smaller telcos who currently lack the ability to offer services to compete with Verizon and AT&T. Sounds, um, complicated.

HD NETWORKS - Things have been pretty quiet in the area of new channel launches and announcements lately, but I'm seeing some acceleration this month, and I have an idea as to why. If you think back to last September, the launch of a new DirecTV satellite caused an explosion of new HD channels (although many have had little actual HD to offer), and thus it's no surprise that the supply of new channels began to dry up when that new satellite began to fill up. With another 50 or so slots opening up at DirecTV this September, we may be about to see a new wave of activity. So we saw three launches this month - two domestic (QVC, which "launched" without any carriage agreements, and Fox News, which launched on Time Warner) and one foreign (HBO Ole, which launched in Argentina), as well as four new-channel announcements.

The biggest attention-getter was the yet-unnamed premium channel backed by Viacom, Paramount, MGM and Lionsgate, which intends to launch next year. This is a direct shot at Showtime, which currently gets most of its movies from the three studios involved, and who will be losing that content in two years. But Showtime's Stu Zakim claims not to be worried, and the real upshot of all this may be to force Showtime to concentrate even more on the original series that provide most of its hits these days. Another new channel launching next year is the Black Television News Channel. Two other channel groups expanded their portfolios, with A&E (A&E, Biography, History) adding Crime and Investigaton HD in the fourth quarter, and Starz Entertainment reviving Encore HD (which it started and then had to drop several years ago due to lack of provider interest) in July.

Existing channels were also doing a bit of expanding (of their HD content), with MHD (which has sought to combine the music-related programming from MTV, VH1 and CMT) now adding music programming (in the form of a Scissor Sisters concert) from the gay-themed Logo channel, while the Weather Channel debuts its new HD studio set. And some other channels are expanding their reach, with National Geograpic HD launching in Austria and Switzerland as well as Germany (where MHD is also bound). Meanwhile, a couple of recent entrants expanded their audiences, as Cox agreed to carry Lifetime HD and Lifetime Movie Network HD and Comcast signed an agreement for MGM HD.

MANUFACTURERS - Not much mopping up left to do from the recent HDM (high-def media) format war - according to this site there are just four more HD DVD titles left to be released. Yet more information on the effect HD DVD has had on Toshiba's bottom line has come to light - first-quarter profits are down 95% on a year-over-year basis.

The ongoing struggle is that between HDM (represented by Blu-ray) and DVD, and these figures show that we are still in the very early innings of this one. Two recent reports (one focusing on price, the other on consumers' basic satisfaction with current DVDs and upconverting players) from ABI Research suggest that Blu-ray will be slow to win consumers over - people just don't think the difference (especially with an upconverting player) is worth the current price. More evidence - a poll from Harris Interactive says that only nine percent of consumers plan to buy a Blu-ray player in the next year. Even Blu-ray backer Disney (who will be adding a bunch of interactive features to its re-release of Sleeping Beauty) recognizes the need to lower prices. On that front, we're just starting to see a move to lower hardware prices, like this $298 Funai deck (marketed under the Magnavox, and Sylvania names) available at Wal-Mart. However, retailers are reluctant to do so for discs, at least until demand picks up (hey retailers - I can think of something that will boost that demand). And Netflix isn't exactly helping with their plan to raise subscription fees for Blu-ray customers. Still, you can't deny that there's been substantial progress - first-quarter disc sales are up 351% year-over-year.

Another thing that should contribute to more demand is an increase the in range of releases available, and we're seeing some signs of that. Paramount (an ex-HD DVD exclusive studio) has finally gotten their release program underway. One of the things that helped HD DVD disc sales remain as competitive as they did during the war was catalog titles, which makes the Blu-ray debut of the Criterion Collection of film classics very welcome news (not to mention the same-as-SD pricing!). Musician Neil Young has a novel use for the format - he's going to release his entire music archive on it. And the indie studios are starting to be heard as well. So perhaps the Bernstein Research prediction that sees Blu-ray in 25% of American homes within three years isn't all that far off.

Turning to other hardware news, everyone's talking about the OLED display technology, even though it's currently only known for very small screens at very large prices. But the quality is such that every twist and turn on the road to larger displays at reasonable prices will continue to get attention. Already, last month's prediction that it will take four years to get to that point is being challenged by Samsung (2009-2010), Sumitomo (the same) and LG Displays (2011). But we also heard the first discouraging word, in the form of a DisplaySearch report that said that the set it tested began to lose it's brightness after only 1,000 hours (and a full 50% of said brightness after 17,000 hours). This rave review (link via Engadget HD) from Consumer Reports doesn't mention the problem, but also doesn't mention if they tested for it.

Near the other end of the mass-adoption curve are HDTVs overall - according to Magid Associates, 5.5 million U.S. households bought one for the first time over the holiday/Superbowl period. Somewhere between the two in terms of adoption is the HD camcorder, which seems to be really taking off right about now.

One last note, with the public only becoming aware of DTV in the last few years, you wouldn't think that people have been laying the groundwork for all of this for 25 years, but it's true. The ATSC (Advanced Television Standards Committee) recently gathered to celebrate this anniversary, reminisce about the early years of doubt and struggle and look ahead to new advances such as mobile DTV.

That's all I have for now!

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