03.31.2010 09:00 AM
NeTVs Really Are the 'Next Big Thing'

DOYLESTOWN, PA.
It was difficult to avoid 3D at this year's Consumer Electronics Show. There were numerous demonstrations of direct-view 3D, employing plasma and LCD display technology, and projected 3D, shown on LCoS and DLP platforms. Booth after booth was stuffed with passive and active shutter glasses. 2D-to-3D converters were also popular, as were demonstrations of wireless 3D and "hands-free" operation of 3DTV sets.

It's clear that TV manufacturers are pinning their hopes for future TV sales growth on stereoscopic imaging. But 3D isn't for everyone, and a lot of the 3D content acquisition, post, and delivery chain has yet to be standardized.

LG showcased its Netcast IPTV product at the 2010 CES.
For me, the real news at CES was the continued growth of Internet-connected TVs, or NeTVs as I've come to call them. A NeTV is simply a conventional LCD or plasma HDTV that is also equipped with a wired LAN or 802.11 wireless connection, and which has its channel menu populated with Internet "widgets"—small icons that take the viewer directly to a broadband video source.

MORE THAN JUST A FAD

NeTVs started to appear a couple of years ago. Using wired Ethernet ports exclusively, the viewer could navigate to specialized broadband video and audio content from content providers USA Today, Yahoo, and YouTube. Not long after, connections to NetFlix (video streaming) and Amazon (digital downloads) were added.

It quickly became apparent that NeTVs were more than just a fad. Parks Associate predicted that over 400,000 of them would be sold by the end of December 2009, but my sources within TV manufacturing companies put the figure much higher—well over 1 million. In fact, research firm iSuppli claimed that over 27 percent of all new TVs purchased this past January had Internet connections, and they predict that by 2013, more than 85 million will be in use worldwide.

So, who's watching? Nielsen Online reported in January that nearly 138 million Americans watched some sort of online video in December of 2009, an increase of 10 percent over the previous year. And those viewers streamed more than 10.8 billion videos, up 11 percent from 2008.

Why are NeTVs so popular? For one thing, they open up a big new world of Internet video viewing experiences at no additional cost to the viewer, aside from Netflix membership or Amazon program purchase fees. All you need is a broadband connection, and you're in business! And Internet video supplements existing cable and terrestrial HD and SD channels.

In fact, some viewers are dropping their cable channel lineups and opting for a less-expensive mix of free, over-the-air HDTV programs, Internet video channels, and streaming movies from Netflix and Blockbuster's On Demand service.

CORD-CUTTING

This paradigm, popularly known as "cord cutting," currently represents a very small number of households and is largely motivated by economic concerns. But it caught the attention of cable giant Comcast, which recently launched "watch anywhere" Internet versions of its conventional channel packages for subscribers.

Interest in viewing Web video has also been driven by Ethernet-equipped Blu-ray players from Samsung, Sony, and LG, along with TiVo's HD and Premiere DVRs. The most popular sites for viewing on these devices are YouTube (no surprise there) and Netflix, where standard definition video content can be streamed in real time.

TiVo's DVRs enable digital downloads of true HD movies and TV shows, using 1080p resolution and H.264 encoding. Vudu, another purveyor of HD movies and TV programs over broadband, was recently acquired by Wal-Mart as the retail giant shifts its focus away from packaged DVD sales to downloads and streaming.

At CES, Samsung announced their version of a TV widget "app store," where customers will be able to download content apps for Samsung TVs, Blu-ray players, and home theater systems via the company's Internet@TV – Content Service.

Not to be outdone, LG introduced the first Blu-ray disc player equipped with a DVR, which can download HD movies from Vudu and other Web video services. Vizio and Sony are also bundling widgets on 2010 TVs and BD players.

Currently, none of these NeTVs or Internet-connected DVRs can access Hulu, which is the second-most popular Internet video site. And that's not likely to change any time soon as Disney, NBC Universal, and Fox would prefer viewers continue to watch their shows on conventional TV channels, preserving audiences and advertising revenue.

Even so, Comcast—the soon-to-be owner of NBC—has already suggested making Hulu a subscription service in the near future, in which case implementing a Hulu widget might make more sense financially. And viewers might be OK with that: In another recent Nielsen broadband video survey, 43 percent of respondents said an easy micropayment method would make them more likely to pay for online content.

BEYOND OPTICAL

There are other market impacts. The steady decline in sales of packaged media (DVDs) over the past five years is being accelerated by NeTVs and video streaming, which is precisely why Wal-Mart and Best Buy are shrinking retail floor space for optical discs and shifting their focus to streaming and downloads.

How do NeTVs affect traditional over-the-air broadcasting? It's hard to say. But in a paper I presented at the 2009 SMPTE Tech Expo, I suggested that savvy DTV stations should be developing and offering their own content widgets as a way to keep viewers on-channel. A breaking news story might only get three or four minutes of coverage at 11 p.m., but viewers could easily click on that station's widget and go to the associated Web site for more details on the story.

The station widget could also provide a return path "ping" for more accurate audience measurement, a "Holy Grail" for station GMs. Combined with return paths on the nascent ATSC-MH services, DTV stations could then present a more compelling case to advertisers while providing a rich, cross-platform media experience that cable and direct-broadcast satellite companies would surely envy.

NeTVs could also serve as a platform to download content and then sideload it to mobile devices, such as Apple's iPhone and Google's Android. Most new TVs are equipped with USB ports and many have provisions for connecting flash memory, ostensibly to view photos and listen to MP3 audio files. It wouldn't take much to make those connections run in the opposite direction.

And NeTVs will have an impact on CableLabs' tru2way integrated cable box system that has been shown intermittently at CES the past few years. Not a single TV manufacturer is building tru2way into any of their 2010 models. Instead, they're concentrating on implementing 802.11n connectivity, which will fuel even more demand for these products. (As for 3D, it too can be delivered over broadband connections to NeTVs and Blu-ray players.)

In retrospect, Bill Gates had it all wrong: People don't want to watch TV on their computers—they just want to watch Internet video on their TVs, (and Blu-ray players, and DVRs, and mobile phones, and gaming consoles…)



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