Sunday, June 29, 2008

Eight Months and Counting: What's Changed?

Once again, the 17th has come and gone, and it's now less than eight months until the "hard" date (2/17/09) on which analog broadcasting is currently scheduled to cease. This is the 27th of 35 planned monthly recaps of developments affecting the various players 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 5/18 and 6/17. As is usual, major news sources for this update include Multichannel News, Engadget HD, TV Week, TWICE, Broadcasting & Cable and TVPredictions.com.

THE PUBLIC - In a bit less than three months (noon on Sept 8th, to be precise) we will see the most concrete sign yet of how the public is going to react to the end of analog broadcasting when the first (and currently only) test market (Wilmington, N.C.) drops analog (except for a public station that will remain on in case emergency information is required during hurricane season). That's true even though opinions differ (even within the FCC itself) as to exactly how representative this experience will be, with FCC officials giving Wilmington special attention. But until that time the best indicator we have is the ongoing stream of surveys trying to figure out what the public knows and what it plans to do about what it knows. And despite the barrage of transition commercials we've been subjected to since the beginning of April, the latest news from Neilsen is that up to 25 million households have at least one TV that will go dark on The Day, and that roughly 10 million stand to lose all their reception. I'm not sure if these work out to be the same amounts as in this Leichtman Research survey (since the latter are measured in percentages - in this case 34% of households with at least one at-risk TV). But given that barrage of commercials, how could anyone not be taking action? Some other figures from the Leichtman survey suggest reasons why. As I've said before, quality of information is at least as important as quantity, so while 84% of adults have heard of the transition, that may not mean as much as you think since 30% of broadcast-only viewers don't think any of this applies to them, and 41% of cable/satellite customers think that even their secondary TVs that are not hooked up to the service are somehow immune as well. Now some of this simply reflects increased sales of digital TVs in the last couple of years, but I'm guessing that still leaves a lot of seriously misinformed folks.

The antidote to misinformation is better information. I've covered the announcement of numerous educational campaigns over the course of the last couple of years, and that announcement is usually the last thing I hear about them. Let's hope for a bigger impact from this Pennsylvania grassroots effort that pairs citizens groups (The League of United Latin American Citizens and the Pennsylvania chapter of the NAACP) with industry players like Comcast and the National Cable Television Association (NCTA).

GOVERNMENT - As I said above, it's not just what you know, it's what you plan to do about what you know. And plenty of people have planned to do something about getting their old TVs upgraded for modern times by way of a digital converter box, but there are signs that a large number of them are encountering some bumps along the way. Last time I noted the gap between the number of coupons that had been mailed out at the time (six million) and the number that had been cashed in (one million), and pointed out that a lot of them must be close to their 90-day expiration date. Turns out I was right, as this Engadget HD article reveals that half of the first 840,000 coupons mailed out expired before they could be used. There are lots of reasons why, from simple procrastination to problems finding a box (or an acceptable box) on sale, as you can see if you check out the comments section of the article I linked in the last sentence. There have been a lot of coupons issued since (you can see the current stats here - as this is being written the stats for June 18th are being shown), and although the expiration percentage has gone down quite a bit, the ratio between issued and used coupons hasn't changed all that much, so it'll be interesting to see how many active coupons end up actually being cashed in. One thing we know from retailers - people are interested in the product.

So if coupons expire, can they be reissued? Since the money stays in the government account until coupons are cashed, you would think the answer would be yes. But apparently the additional funds necessary to (I'm not kidding, honest) mail them out again may break the budget, and there are currently no plans to increase said budget. I just don't know what to say about that, I really don't. It makes you wonder whether the Japanese solution of just giving converters out (to the poor) might be a better way to go.

For those who've waited and can find a good selection of boxes in stock, here are two reviews of boxes with a feature that addresses a shortcoming in many early boxes, an "analog pass-through" feature that will allow you to keep watching low-power stations (which are not obligated to go digital). One shortcoming that has not been addressed so far is the lack of compact, portable boxes that can act as a companion to the large supply of battery-powered portable TV sets that are out there (that will cost about $200 to replace with a digital equivalent).

The FCC's "dual carriage" mandates (digital and analog) continue to arouse objections, this time from DirecTV. Also objecting to FCC decisions are two of the retailers who were recently fined for not providing proper warning labels on their remaining stocks of analog TVs (they're basically challenging the FCC's jurisdiction over the retail sector). As I've mentioned before, objections to FCC Chairman Kevin Martin's oversight of the agency have led to a congressional investigation, but the ranking Repubican on the committee doing the investigating doesn't think it will amount to much (not too shocking, considering).

Another area of lingering controversy is the idea of offering channels on an "a la carte" (i.e.) individual basis, as opposed to offering them as part of large programming tiers. One of the most persuasive counter-arguments to this notion is that it would make it much harder for new and innovative channels to get off the launch pad (the market rarely demands what it hasn't imagined yet). At least some independent channels feel otherwise, though, as they are complaining (under the umbrella of National Association of Independent Networks) to the FCC about the practice of large media companies demanding carriage for their less-popular channels in order to get their must-haves, a complaint that least implicitly seems to be in favor of a la carte. More good news for a la carte advocates comes from the U.S. District Court in Los Angeles, where it appears that the judge presiding over a lawsuit in favor of a la carte appears inclined to let the suit go forward. One question I'd like to see everyone ponder a bit more; how many of today's top cable nets arose out of overwhelming public demand, and how many were first discovered by the public because they had been added to a tier?

BROADCASTING - This was another month in which the big news in broadcasting was the news itself. While there were fewer new local HD newscasts than last time, the national scene was also active, with the CBS Evening News preparing to go HD in late June or early July, followed by their newsmagazine 60 Minutes in September (still no plans for Face The Nation that I'm aware of). This leaves ABC World News as the lone holdout in national primetime newscasts, but with Nightline rumored to be going HD in September, can the big newscast be far behind?

Last time I mentioned the problems HD newscasts have in getting HD location footage to complement their studio shots. This Broadcasting & Cable article goes further into efforts to improve the situation (some interesting Weather Channel info included). Wrapping up the news-related news is this piece on HD and election coverage.

Other areas than news are also converting to HD, with the syndication market getting a boost when Dr. Phil goes HD on September 8th. And CBS (an early leader in HD football) will finally have all NFL games available in HD for the 2008-2009 season (compare this to France, which won't even get Olympic HD coverage).

One area (retransmission rights) that has been quiet lately is generating some new stories. LIN Broadcasting came very close to pulling their stations from Charter, but settled in the end (they also reached agreement with DirecTV). And CBS's Les Moonves (who has that very popular NFL programing mentioned above available as a bargaining chip if need be) has been talking about the subject recently.

PROGRAM PROVIDERS - The pace of channel adds seemed to moderate a bit in the last month, with only one double-digit add I know of, Cox's addition of 11 channels in the Topeka, Kansas area. Cox was also busy elsewhere, with adds in Virginia, Florida, Louisiana and Rhode Island (with Lifetime and Bravo being the additions less likely to be seen in competing lineups). Comcast in Houston also added something not seen everywhere - a MyNetworkTV affiliate (something that will probably become more common when Smackdown debuts on the network this fall. Meanwhile, Dish continued to expand its local coverage with a clutch of stations owned by Tribune Broadcasting.

Of course, to add channels you have to have the capacity to do so, and that goal continues to be the focus of providers everywhere. Dish has a new satellite thought to be going up sometime this summer, and DirecTV's new bird (which should expand their national HD channel capacity to 150) is in orbit and being tested (and should be operational sometime in September). These moves leave cable playing a perpetual game of catch-up. How best to play that game? One strategy growing in popularity is to cut back the space devoted to analog. You can do this a few channels at a time (as Comcast has just done in the D.C. area, and will be doing it again in Greater Boston on 7/15 and Pittsburgh some time in July), or you can go all out (as RCN is doing in Boston) and eliminate analog altogether. This approach risks alienating "legacy" subscribers, but the gradualist approach has its problems as well. For instance, you may have to make up for fewer HD channels by basing a marketing campaign around the idea that people care more about VOD choices than linear channels. Does anyone outside Comcast's marketing department take this at all seriously? Perhaps they don't even buy it themselves, as they have their own plans to replace analog (starting with 20% of their footprint in the fourth quarter) and give customers who don't want the whole "digital cable" package a small digital adaptor box (similar in concept to the adaptor boxes over-the-air viewers are attaching to their analog sets). It will be interesting to see how many channels are offered with that. Verizon eliminated analog recently, and that probably had something to do with their recent announcement of 60 new channels (25 in HD) rolling out over the next few months.

Another way to do it is through Switched Digital Video (a technology which sends a channel only when you need it, instead of cramming everything in the system into the pipe going to your house) - Time Warner has been known to use it, which may underly their recent claim to have 63 HD channels (not everywhere 'tho; they only have 16 in Los Angeles, one of the media capitals of the country). But that has its problems too - TiVo and CableCARD customers can't see the channels you've assigned to SDV. But at least for TiVo customers there is now a "tuning adaptor" to allow them to see those channels. Cox will be providing them at no cost to their TiVo customers. You can see it in action here. Longer term, there's the more-efficient compression codec MPEG-4 catching on, but there will have to be a whole lot of equipment switched out before that effects the practical capacity of your local system.

No updates on the legal matters I reported last time (involving Comcast with both AT&T in Chicago, IL and the municipal utility in Chattanooga, TN), but we have some new developments in the ongoing struggle between Dish and TiVo over the latter's DVR patents. Dish has filed a new lawsuit asking a Delaware court to rule that they are no longer infringing on TiVo's patents and do not have to disable all their current DVRs. However, a prominent analyst (Sanford Bernstein's Craig Moffat) thinks that Dish is potentially risking billions by continuing the struggle. Sounds like they can't get their new Sling-enabled DVRs out there soon enough. Also getting into it with Dish is the recently-dumped VOOM Networks, claiming breach of contract and more than $1 billion in damages.

There was no franchising news last month, but we now have some updates on situations we reported on two months ago. At that time, Louisiana and Tennessee were both considering statewide franchising. Since then, the Louisiana bill (which exempts certain municipalities with home-rule provisions, such as New Orleans) is headed to the governor's desk, and the Tennessee bill has actually been signed into law. Also at that time, Verizon was seeking a city-wide franchise in New York City, and has since won the approval of the Franchise and Concession Review Committee (not the end of the process, 'tho).

While not otherwise occupied expanding their lineups, suing or being sued and trying to remove municipal oversight over their operations, the big providers actually get around to doing other things once in awhile. Sometimes they can even co-operate, as when the "Big 6" cablecos (Comcast, Time Warner Cable, Cox, Charter, Cablevision and Bright House Networks) recently made an agreement with Sony to implement tru2way as a joint standard for two-way interactive products used with digital cable and TVs (sure to be popular with the "I don't want a box" crowd). This was followed not long after with the same agreement being adopted with five other consumer-electronics companies (ADB, Digeo, Intel, Panasonic and Samsung). Comcast later submitted a copy of this agreement (which details matters such as rules for navigation screens, opt-out provisions and other matters) to the FCC.

Individual providers were busy as well. Comcast will be giving more focus to its top markets by dropping more than 40 smaller ones. Time Warner, meanwhile, is dropping its cable unit altogether (although apparently it will still be called Time Warner Cable). AT&T addressed a shortcoming of its U-Verse service by introducing the ability to record one HD channel while watching another (in certain areas), and is currently involved in a dispute with the state of Connecticut over the rules for installing its large V-RAD cabinets on public rights of way.

Non-traditional providers also made some news. TiVo's Comcast rollout is expanding (I'm still waiting for better news from posters who have it currently), they will be offering 24-hours rentals of Disney movies (some in HD), and are bundling their TiVo HD DVR with Mitsubishi TVs on Amazon. The VUDU service keeps on plugging away, and has now secured some retail space at Best Buy. And now Netflix has gotten into the act, with a $99 box from Roku, giving you access (through your Internet connection) to 10,000 movie/TV titles. And that's a one-time charge - after that, the content is free to Netflix customers without affecting the number of DVDs they can get. Alas, no HD available at launch, although the head of Roku says the device is capable of delivering it. Finally, a reminder that not all new ideas are successful ideas - Virtual Digital Cable, formed to deliver a full cable television service to your computer monitor, has shut down.

HD NETWORKS - Last time I speculated that the slight uptick of new channel launches and announcements (three launches and four announcements) might have something to do with the impending September activation of a new DirecTV satellite (and the fifty-some new HD slots it's supposed to bring). There was a bit less activity this time, so maybe I spoke too soon. There was just one launch - Planet Green, whose SD side simply replaced Discovery Home in channel lineups but whose new HD companion only has Time Warner (New York and San Antonio markets) and Cablevision on board at the present time. There are also only three announcements (although one of these is for multiple channels).
The big one (at least in terms of numbers) was the addition of eight of Showtime's channels in August, followed by another 10 in the first quarter of '09. But it's probably not that big in terms of immediate impact - HBO now has 26 HD feeds, but how many have been seen outside of the control room? Even DirecTV only runs the East and West feeds of the main HBO channel (Starz has had more success in getting DirecTV slots for its expanded HD lineup). Eventually SD cable will wither away and the HD feeds will become the default offering, but I wouldn't expect to see too many of these in your living room in the near future. Much more likely to show up there is E! Entertainment HD, which debuts in December. Given that it's owned by Comcast, distribution shouldn't be too much of a problem. The other announcement concerns TV One (a channel geared toward African Americans), which will debut its HD simulcast in the fourth quarter.

Some recently-launched channels made headway. MGM HD now has agreements with Dish, Comcast and Time Warner, and QVC HD has just signed its first agreements (with larger carriers expected by year-end). And while it's natural to focus on what's new or forthcoming, let's not completely forget about the established channels. One that's just hanging on to that status is the VOOM family, who only have one major domestic carrier left (Cablevision), and that contract expires soon. While the programming may be too "niche" for many I personally would like to see VOOM stick around in some form to help represent the concept of all-HD specialist programming. Perhaps they could manage that by shrinking down to one or two channels, as they do for overseas distribution, where they just picked up a new customer (Canal Digitaal in the Netherlands) and added an HD VOD service. Two others expanded their HD hours, as The Weather Channel finally began broadcasting from their new HD studio, and Fox Sports Net (representing 16 regional sports channels) announced that they will broadcast their entire lineup in the format by Q1 of 2009. Finally, I just want to recognize one particular program, and congratulate Discovery Channel on the great job they've done on When We Left Earth: The NASA Missions. While some of the historical film shows its age, I have never seen the spacewalk and lunar rover footage look anywhere near as good as I did when watching this.

MANUFACTURERS - The primaries are over, and Blu-ray is the nominee of the HDM (high-def media) party. But the HDM vs. DVD general election campaign could go on for years and years. DVD certainly has a massive lead in the polls so far. But things are beginning to look up - Blu-ray's weekly share of disc sales recently cracked double digits for the first time (at 10%) before dropping back down (it was 7% for the most recent week, but that's still ahead of where things were a month before). Other indications of better days ahead for the format - expanded retail presence at Wal-Mart, Borders and Target, addition of Blu-ray discs to rental-kiosk machines (at no additional charge, I might add), the return of previously deleted Paramount titles, unexpectedly high sales for some PBS discs (which feature footage you might remember from the old "demo loop" days of the PBS HD Channel) and a decision by Warner Brothers to focus less on theatrical releases and more on building acceptance for Blu-ray and VOD. And the format is even pulling ahead in a key demographic (following link via Engadget HD) - high-end retailers (such as Crutchfield) expect Blu-ray decks to outsell DVD machines as early as August (please note I said "high-end retailers"; no one is expecting this to happen at Best Buy anytime soon). OK, I've extended that particular metaphor about as far as I care to.

Besides the Paramount titles listed above, there was some other disc news of note. One of the often-seen complaints about the format concerns the high prices of the discs themselves, so Blu-Ray Only's plan to release classic films for $12 a pop should offer some welcome relief to the real film buffs out there, and hopefully point the way to more reasonably-priced releases in the future. Also adding to the variety of available titles is Blue Underground's slate of horror films with cult appeal (two of their first six releases are directed by Dario Argento). And while TV shows on Blu-ray are no longer news, I hope we can agree that the eye-popping color palette of Pushing Daisies will make this an especially-appropriate release come September.

Speaking as we did above of reasonable prices, Best Buy house-brand Insignia dipped below the $400 recent standard price with its $349 player, which is sold with a $100 coupon book of disc savings. Depending on how much use you get out of those coupons, that may or may not be a better deal than the $298 Funai/Magnavox/Sylvania deck discussed last month. Looking ahead, it'll be interesting to see just how much effect a new integrated circuit from Matushita (that replaces four current ones) will have in reducing prices.

But there are still challenges and caution signs ahead. One of the things that is slowing adoption of Blu-ray among HDTV owners is the existence of affordable upconverting players, and now Toshiba is looking to get back some of their lost mojo with a new DVD player that they claim will provide a picture close to that of high-def. This should happen within six months, and we'll be looking to see just how close they're talking about (link via Engadget HD). And even further ahead is a challenge to all physical media, that of digital downloads. But just how far ahead? It's true that Blockbuster is taking a significant step in that direction by installing download kiosks in their stores, but their chief rival Netflix feels that DVD and Blu-ray will stick around for the next 20 years, although they may peak sometime in the next ten.

And here I thought I'd be writing a lot less about this once the format war was over!

So let's wrap this up by getting to the other hardware news. In the PROVIDERS section I mentioned an agreement that would spread the adoption of the tru2way standard, and looking around it certainly seems that there's a lot more product around lately. Two of the parties to that agreement were showing off equipment at the recent Cable Show; Samsung had a tru2way DVR, STBs and an LCD TV, and ADB showed off their STB (aimed at providers rather direct to the public). However, the tru2way products of another of the signees (Panasonic) are apparently not ready for prime time. Another technology sure to change TV is net-connectivity; Sharp has a product in Japan that will eventually make it to the U.S., and Yahoo! Japan has just provided it with a web portal formatted for 1920 x 1080.

Display technologies continued to rise and fall. Sony's OLED is still getting a lot of attention, with Sony recently showing off a small panel that is only 0.33 millimeter thick, and aiming to move up to medium/large panels in their 2009 fiscal year (which runs from April 2009 to March 2010). Anyone know which fiscal year will see this technology in sets that the average person can afford? More detail on Sony's thinking is available from this CNET transcript of a conversation between Sony CEO Howard Stringer and technology journalist Walt Mossberger. Meanwhile, Phillips is looking to get out of the plasma business - could it be because LCD outsold plasma 8-1 worldwide in the first quarter of this year?

Here's an interesting idea I really wish someone else had come up with. This unusual 46-inch HDTV will double as a display of digital art (complete with picture frame) when it's introduced later this year. The downside - all the art is by the relentlessly quaint Thomas Kinkaid. One more note on current displays - you may have noticed that Vizio always seems able to undercut makers of similar sets by $100-200. Could part of this possibly be attributed to their failure to play licensing fees to the patent holders of video compression technology, as five larger set makers allege in a recent lawsuit?

A good way to end is by looking ahead, and this month brings some more news on HDTV's eventual successor, NHK's Super Hi-Vision system. NHK (Japan's public television network) recently showed off a new 33MP image sensor that will do the work of four previous ones, but the big news is that NHK will be teaming up with the BBC for an actual transmission test this September at the IBC technology show taking place in Amsterdam (thanks again to Engadget HD for the link). This technology is still years away from deployment, so no need to start budgeting for it yet.

That's all I have for now!

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