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The March 16, 2009 Issue Provided by System Dynamics Inc.
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TV Sets Riding "The Internet Avalanche"

Internet video on the TV was a big deal at CES 2009. In a keynote address, Jong Woo Park, President, Samsung Digital Media, said "TV is no longer just TV. TV is interactive TV these days. You will use the same TV and the same remote control, but have completely different functionality."

Of course we've heard that song before. Twelve years ago in Set-top mating dance escalates, Leslie Ellis and Monica Hogan described "a mating ritual between consumer-electronics firms, software giants and set-top manufacturers. The end game: a successful ride on the Internet avalanche, whether that happens on the PC, the TV or both." (Multichannel News, Sept 22, 1997)

It might even be true this time around.

  • TVs are now digital. Content that would have been hard to view on analog sets--like text--looks great on the new digital sets.
  • Broadband is widely deployed, at ever-higher speeds.
  • The Internet offers a flood of video content available for free. It started with user-generated content and now includes more and more from the broadcast networks.
  • Finally, PCs and DVRs and smartphones have gotten us all accustomed to living in an interactive, on-demand world.

We've written extensively about linking the TV to the PC and to the Internet (see For More Information below), so we'll concentrate on what seems new.

One way of looking at the various approaches is to divide them into three categories:

  • Net-enabled TVs
  • Boxes (CPE) that connect the TV to the Internet
  • Network intelligence

Net-enabled TVs

Net-enabled TVs have a direct connection to the Internet, with hardware and software for Internet application built into the TV. Many companies have been working on the necessary hardware and software technologies.

Yahoo TV Widgets --> Click for larger pictureIntel and Yahoo! have been working together on the Widget Channel, using Yahoo software and Intel's Media Processor 3100 chip to bring Yahoo Widgets to the TV. At CES, Toshiba and Samsung demonstrated TV Widgets with Intel and Yahoo, and Toshiba said it planned to bring products to market this year.

AnySource Media has a different approach. Its Internet Video Navigator software platform is embedded in silicon in the TV. The heavy lifting is done out in the Internet by the associated IVN Data Center, which aggregates content for TV viewing. At CES, AnySource demonstrated its solution with TV maker Funai.

These directly connected sets are positioned as "walled gardens," connecting only to pre-determined media services and applications.


Internet Boxes

Internet Boxes provide the necessary functionality to connect the TV to the Internet. Some are special purpose boxes, like Vudu and Roku, which connect to specific services such as Netflix. Others are more general purpose and include PCs, game players like XBox, Blu-ray players, and DVRs such as TiVo. At CES we focused mostly on boxes available through the retail channel, but some new cable and telco-provided set-tops also fall in this category.

High definition (HD) was supposed to be a competitive advantage for cable companies and their on-demand video services. It looks like that edge is being eroded by "over the top" video that comes to the TV through a high-speed Internet connection rather than through the traditional video distribution.

In the Roku/Netflix partnership, Roku has released support for streaming HD content through the use of advanced compression technology. Netflix is adding hundreds of HD titles to their catalog. The Roku box sells for $99.

Vudu's video on demand service and box claim to deliver movies at up to full 1080p HD resolution and with 5.1 surround sound.

Greg Gudorf showed us Moxi retail box --> Click for larger pictureOne product which caught our attention was the retail version of the Moxi HD DVR with CableCARD from Digeo. Digeo has been a settop provider to cable companies like Charter and BendBroadband for some time, but what was new at this show was Moxi's retail version, sold exclusively on Amazon. We've always liked Moxi's user interface. We've been promised one to test, so will let you know how we think the experience compares with other DVRs we've used for years.


Network Intelligence

This approach puts the intelligence in the network rather than the end-user device. This is an interesting category, because it is one that has been subject to "common wisdom" which changes over time. There was a long time when increasing intelligence in the end-user device was the major market direction. Increasingly, "cloud computing" has become the mantra and the tide is shifting toward the network.

We have believed for some time that, with the pace of technological changes, it was questionable to concentrate processing intelligence in the CPE, because the life cycles and capabilities of personal computers and those of consumer electronics are so different. Internet technologies are constantly evolving; it's easy to download the latest version to a PC, but hard to a TV or fixed-function Internet box.

Because the installed base of cable settop boxes includes many with very limited functionality, CableLabs created EBIF (Enhanced TV Binary Format). This specification was designed to run on most existing settops, while still providing some base level capability for interactivity.

ActiveVideo's Jeff Miller --> Click for larger pictureActiveVideo's long-standing philosophy is to put the video processing load and applications in the network, with a "thin client" built into a set-top box. At CES, we visited with their team including Jeff Miller, their CEO, and John Callahan, their relatively-new CTO, to get an update on their progress.

Miller explained how ActiveVideo's network-based approach can be combined with EBIF to make more extensive interactivity available using existing settop boxes.

We saw several examples of the kinds of things that this largely network-based approach makes relatively straight-forward.

  • Access and searching for You Tube videos can be integrated into the consumer experience on the TV
  • ActiveVideo demo of HomeDepot --> Click for larger pictureWhen a user wants to interact with a vendor such as Home Depot to purchase or get detailed video instructions, the Active Video interface can provide the follow on videos and information.
  • ActiveVideo demo of Showtime promo --> Click for larger pictureIt's easy to implement marketing campaigns where ordering can take place immediately from the TV, without going to the PC. For example, we were told that when Oceanic Cable promoted Showtime upgrades, there were almost 20 times more upgrades via TV interaction than with a PC.

Further details on how ActiveVideo can be combined with EBIF are contained in a whitepaper which can be downloaded from the ActiveVideo Networks website.

[Editor's Disclosure: We previously provided consulting services for ICTV, ActiveVideo's predecessor company.]

Since the CES show, there has been an explosion of devices, services and companies targeting this market. One new example, Zillion TV, currently in beta testing, has its own settop and is targeted for distribution thru telcos, cable operators and other service providers.


For More Information

We've written many articles on this subject. Here are three from last year:

( www.intel.com ) ( www.yahoo.com ) ( www.toshiba.com ) ( www.samsung.com ) ( www.anysourcemedia.com ) ( www.vudu.com ) ( www.roku.com ) ( www.netflix.com ) ( www.digeo.com ) ( www.activevideo.com ) ( www.zilliontv.tv )