FreeLists / opendtv / [opendtv] Analysis: Why Low Def is the New HD

[Craig Birkmaier <craig@xxxxxxxxx>]

I stumbled across RoughlyDrafted magazine last week via one of the 
web sites that covers Apple, which I visit regularly.  It is a very 
personal magazine, demonstrating that an individual can bypass the 
traditional publishing industry infrastructure, going direct to the 
consumer. THis following piece is so well written, that I suspect the 
author, Daniel Eran Dilger, might be lurking on this forum.
While acknowledging the importance of the market for HD displays and 
content to feed them, he provides some very compelling reasons why 
Low Definition video has SIGNIFICANTLY greater growth potential than 
HD.
Enjoy!

Regards
Craig

http://www.roughlydrafted.com/2007/12/04/why-low-def-is-the-new-hd/

Why Low Def is the New HD.

December 4th, 2007
Daniel Eran Dilger

The video industry is heavily promoting HDTV as the biggest new thing 
since color. While it's uncontroversial that HDTV can deliver an 
exceptional picture for users of the latest large flat screen 
displays, sometimes a high pitched marketing message can drown out 
more interesting realities. In 2008, it appears that low definition 
video will actually have a bigger impact on consumers; Apple's 
strategies in video take that potential into consideration. Here's 
why Low Def is big and getting bigger-and why it's bigger than HD.
Low Down on Low Def.

Low Definition video is commonly equated with VHS, VideoCD, the 
original Nintendo NES game console, and the first Sony PlayStation. 
All four delivered about a quarter the resolution of Standard 
Definition video, which is typically 720 x 480. On a standard TV, Low 
Definition video from these sources looks fair to poor.
Analog video signals don't deliver a precise resolution comparable to 
a computer display; that's why most video devices of the 80s and 90s 
described video quality as a number of lines of horizontal 
resolution. VHS provided about 250 lines. A typical TV broadcast 
delivered 330 lines, while LaserDisc and SuperVHS could output around 
420 lines of resolution.
In addition to a lower detail resolution, these analog signals also 
involve a limited color resolution that makes it hard to directly 
compare them with today's digital video signals. Thinking of VHS as 
being "a quarter the resolution" of DVD doesn't convey how much worse 
of a picture it actually delivered in various ways.

The New Standard in Definition.

In the late 90s, DVD began offering high quality, low cost Standard 
Definition video. Sony's PlayStation 2 arrived in 2000, and helped 
popularize the DVD along with much higher quality video games that 
also output a true SD signal with around 520 lines of analog 
resolution. In addition, cable and satellite providers also began 
offering high quality programming using digital compression. All of 
these used MPEG-2 encoding to provide an SD video signal that could 
be about as good as standard TVs could deliver.
At the same time, video quality hasn't always just progressed 
forward. The compression applied to digital TV signals can result in 
a less attractive picture, even when it has a higher nominal 
resolution. While old analog equipment gradually degraded in 
sharpness and introduced noise with a weak signal, compressed digital 
video quickly shatters into blocky artifacts and can fall apart 
completely when the signal strength dips momentarily.
In the last few years, the display technology of TVs has jumped into 
the realm of High Definition. There are HD replacements to the DVD, 
to video games, and in broadcasting. However, the upgrade path for 
consumers isn't necessarily a straight one leading to HD. The road is 
forking, and the technology being used to deliver HD is also finding 
applications elsewhere, including a boost to Standard Def and Low Def 
video quality.
The Tortured Path of HDTV.

Modern efforts to introduce HDTV in the US began twenty years ago. 
While Japanese broadcasters began analog HD transmissions even 
earlier, it was quickly determined that the next generation of TV 
should be digitally encoded. That complicated the rollout of HDTV and 
delayed widespread adoption. The first standards only appeared ten 
years ago, and HDTV has seen a glacial deployment since.
After working together to deliver the DVD as a distribution format 
for Standard Definition video using MPEG-2 digital encoding, the 
industry has splintered in the move to deliver a new High Definition 
video disc format.
While most major manufacturers are now selling Blu-Ray systems 
commonly using MPEG-2 or the new MPEG-4 AVC H.264 encoding to deliver 
HD video, Toshiba and Microsoft are working to establish the rival 
HD-DVD format, which principally uses Microsoft's own Windows Media 
Video codec, published through the SMPTE under the name VC-1. Both 
systems can deliver HD formats in resolutions of 1280x720 or 
1920x1080.
Outside of the HD disc format war, satellite and cable providers are 
also working to deliver HD programming, and some TV stations now 
broadcast an HD signal over the air. When analog TV broadcasting 
stops next spring, the digital TV infrastructure that replaces it may 
likely increase the amount of HD content being broadcast. Digital 
broadcasting of Standard Definition programming has already improved 
dramatically based on work related to HDTV.
Because HD delivers such an extremely high quality signal, many 
producers are worried about piracy; HD broadcasts and HD discs can 
serve as pristine masters for unauthorized duplication. That has 
resulted in an insistence upon draconian new DRM in attempts to 
prevent any leakage of HD content out of the direct-to-TV display 
chain, using the High Definition Copy Protection DRM standard to 
police how HD content can be used and displayed.

This All Happened Before.

If that sounds familiar, it should. The circumstances of the HD disc 
war are eerily similar the previous drive to move audio content from 
the CD format to new "audiophile" high definition audio formats with 
"unbreakable" new DRM schemes.
The DVD-Audio and SA-CD formats ended up battling for supremacy of a 
market that never developed. For consumers, CD was plenty good 
enough, and the extra bump of sound quality offered by the new 
formats wasn't enough to offset the higher price and new user 
restrictions, including the inability to rip content for mobile use.
That's right: while the industry was trying to herd consumers into 
buying "HD audio," individuals were instead compressing their 
existing "standard definition" music on CDs for use in mobile 
applications. The use of MPEG audio compression allowed the 640 MB of 
raw CD data to be compressed down into 64 MB or less of MP3 files.
When played back on fancy stereo systems, elite users could certainly 
hear a difference in MP3 compressed audio. However, the point of MP3 
wasn't to replace CD or rival SA-CD or DVD-A, but rather to free 
content on CDs for use on computers, and later for use in mobile MP3 
players. This compelling new product rapidly ate into new CD sales 
and devastated the market for the new DRM-laden "high definition 
audio" formats.

Why Less is More.

CD audio is very good. Not good enough to impress audiophiles, 
particularly given that there is some variation in the quality of CD 
mastering. But while it can't deliver the full range of sound that 
can be captured in a studio in ideal conditions, CD audio is still 
very good. In many cases however, CD is not only "good enough" for 
consumers, but is actually too good.
Ten years ago when MP3 began taking off, raw CD audio was far too 
large to be used directly on computers. MP3, part of the MPEG-2 
standard, compressed CD audio from 1,411 kbits/sec down to around 128 
kbits/sec. While listening to MP3 audio from a computer had a limited 
appeal, the compression process threw out enough data to make it 
feasible for music originating on CD to also play from more compact 
players such as the Diamond Rio MP3 player.
New hard drive based MP3 players like the Creative Nomad and Apple's 
iPod were not only much smaller than CD players, but could also hold 
the equivalent of hundreds of CDs in that compressed format, changing 
how people listened to their music. That change was made possible by 
trading off a small amount of quality for a large amount of 
convenience.
The Evil of Two Lessers.

Failing to grasp the needs of consumers resulted in Sony's loss of 
its Walkman legacy. While the company had excelled at building 
miniaturized cassette tape and later mobile compact disc hardware, it 
didn't understand the software business. Instead, Sony attempted to 
sell a smaller disc in MiniDisc (which like MP3, threw away quality 
to deliver portability) and a higher definition disc in SA-CD. Both 
found only limited adoption, in large part because of the DRM 
restrictions Sony imposed on both of those formats.
As a software company, Microsoft didn't have Sony's hardware 
fixation. Instead, Microsoft delivered a software-only solution that 
intended to replace the ISO's interoperable, open MPEG standards 
behind MP3 with the Microsoft-controlled Windows Media Audio format. 
WMA was designed to serve labels and producers by allowing them to 
kill fair use rights and remotely terminate users' music using a 
complex DRM architecture. That's also why consumers rejected it.
When Sony later attempted to copy Microsoft's DRM strategy for 
policing audio on CD, it was revealed that the company installed a 
third-party root kit to achieve the same degree of DRM power that 
Microsoft had built into Windows with WMA. Consumers were again angry.
Ironically, when Microsoft tried to enter the hardware business with 
the Zune, it was similarly revealed that Microsoft had bungled things 
as badly as Sony, despite having a similar reliance on third parties 
to deliver most of the effort.
Hardware Software Integration.

Apple certainly didn't deliver the first hardware MP3 player, nor did 
it offer the first software to manage or purchase music. Instead, 
Apple developed an integrated product that assembled open 
technologies to deliver a well designed hardware product paired with 
desktop software that was effortless to use.
Apple mopped up the pools of demand from consumers who wanted a 
device that worked with their existing CD collections without 
demanding that they buy new discs (as Sony had) or pay to download or 
subscribe to new audio files (as Microsoft did). Apple's iPod didn't 
take off primarily because of advertising, but because it was a 
product that did exactly what the market demanded.
Returning back to HD video: the market is not primarily demanding a 
better picture. That message is being marketed to consumers by 
companies with HD products to sell, like Sony and Microsoft. What 
consumers really want are products that just work.
        *       Easy to use movies that play back on command.
        *       TV programming that's available when they want to watch it.
        *       Portable video that plays in the car and on mobile devices.
        *       Access to diverse, alternative content sources.
	*	Commercial content that works like their own home 
videos and photos.
DVD became popular because it solved many of the previous demands of 
consumers for a more durable, higher quality replacement to VHS that 
didn't require rewinding. The majority of users are not upset with 
the picture quality of DVD today. Certainly, anyone with a new HDTV 
wants the maximum quality possible. However, sales of HD discs have 
not been overwhelming, despite the massive marketing push devoted to 
Blu-Ray and HD-DVD.
Both HD formats also complicate things for users who like to rip 
movies for mobile playback; full sized, standalone HD disc players 
are still expensive, leaving mobile players as an unaddressed market. 
Further, HD discs really don't offer any mobile advantage over 
standard definition DVDs for users who want a mobile version. DVDs 
are also easier to rip into mobile versions.
The Rise of Low Def.

When rumors surfaced of a video iPod back in 2004, Apple dismissed 
them with comments suggesting that consumers didn't want to watch 
movies on a 2" screen. However, Apple was also pioneering another 
market: podcasting. Video podcasts are commonly targeted to small 
screen playback, and fill a market need for alternative content that 
can't be delivered by mainstream media supported by broad advertising.
The market for broad advertising is dying with the old model of TV 
being three channels delivered by three big companies. Just within 
the US, there are now hundreds of cable and satellite channels vying 
for attention, and broad advertising can't sustain such diversity. 
What will increasingly happen is that smaller productions will be 
financed by a combination of very targeted advertising and user 
sponsorship, just like content on the web.
While HD obviously isn't going to dry up and blow away as SA-CD and 
DVD-A did, the market for mobile devices that can play back targeted 
podcast content is going to outshine them. The podcast market-whether 
free as most existing podcasts are, or paid in the form of iTunes TV 
downloads, or direct broadcast feeds supported by ads as NBC is 
doing-commonly falls into the category of Low Def.
Low Def is below Standard Definition video, but that doesn't mean Low 
Def has to be poor VHS quality. Low Def "LDTV" devices such as the 
iPhone (320x480), the iPod (320x240), and the Playstation Portable 
(480x272) all use a screen resolution below standard TVs, but are 
also much more compact and portable, too. Their accurate color, high 
density screens display mobile video that looks great.
These don't directly compete against HD any more than MP3 players 
battled against audiophile SACD or DVD-A formats. However, the market 
for content-whether free, paid, or ad supported-is going to favor LD 
over HD in video for the same reasons low def MP3 audio won out over 
high def audio formats.
The Paradox of LD Competing with HD.

It is not only much cheaper to produce content for LD screens than to 
deliver HD content, but it's also less expensive to archive and 
deliver, meaning it also costs less and is faster to download by 
consumers. Anything recorded in HD can be offered in an LD version at 
minimal extra cost. Additionally, existing Standard Definition video 
on DVD can already be delivered to LD devices. DVD can also be 
up-sampled to HD, but with less impressive results.
In addition to being cheap for independent producers to deliver, 
there is also fewer or no DRM restrictions on LD video, because there 
is no market for pirating LD content for resale on DVD or other 
formats. Additionally, as consumers shift toward more active, 
portable devices, they'll be more likely to have access to LD 
content, which will interest advertisers who want to actually reach 
people rather than simply deliver sharp looking ads.
The iPhone already delivers early access to LDTV with YouTube, and 
can display live LDTV programming from direct web broadcasters via 
RSS video podcasts or video embedded in web pages. When Apple talks 
about "near DVD quality" in the iTunes Store, it's describing the 
borderline between LDTV and standard definition video.
Of course, Apple is also delivering HD products. Consumers want HD 
video and HD photos and HD audio. Apple TV delivers HD home movies, 
HD photos, and can deliver HD audio. It can also deliver SD/LD video 
from the iTunes Store. More importantly, iTunes can sync the same 
video, photo, and audio content to Apple TV as it does to the iPhone 
and iPods.
Most middle class households will eventually get an HDTV over the 
next couple years, but many of those households will likely have 
multiple mobile devices. Being able to accommodate all of them with 
one pool of content will be important. Neither Blu-Ray nor HD-DVD 
currently serve that market, although Apple has tried to push both to 
include an LD version of movies for use with portable products.
Same Characters, Different Medium.

Just as was the case a half decade ago, Microsoft and Sony are in a 
battle to push their DRM-centric formats under the guise of 
delivering higher definition. Once again, Sony is ahead with real 
hardware products while Microsoft is waging an expensive 
misinformation war that suggests its software has won.
However, Apple is also again in the position of setting up the 
foundations for delivering what consumers really want: open, 
DRM-optional, alternative, user-producible content and portable 
hardware that plays it back. Despite the availability of HD downloads 
elsewhere, Apple is still selling the most video programming online. 
That's because the market is demanding what LD delivers, not what HD 
vendors are pushing.
Last year, Apple's share of the video downloads market rose to 90%, 
with Vongo in second place with 5%, Movielink at 2%, and others 
trailing with smaller bits of the pie. Since then, Apple's share has 
increased slightly. Even when only looking at movie downloads, where 
Apple offers less content than other competitors and hasn't yet 
matched them in offering HD content, iTunes still has a 42% share, 
twice as much as the second place Vongo at 21%. Movielink and 
CinemaNow both have 15%, leaving everyone else to fight over the 
remaining 7%.
While Microsoft is touting HD downloads via its Live service, the 
reality is that HD isn't leading sales. In fact, neither Microsoft's 
movie downloads nor its TV business are even significant in the 
download market. That's why nobody ever talks about Microsoft's 
market share in online downloads.
Looking at the Entire Market.

When physical DVD sales are considered, Apple's ownership of the 
online market only gives it about 1% of all movie sales. However, the 
company also nurtured its current 10% share of all music sales by 
making online music attractive and convenient. As Apple pushes into 
TV playback with Apple TV and expands the installed base of video 
playing iPods, including the iPhone and new iPod Nano and Touch, it 
will expand the demand for iTunes programming.
Critics have tried to suggest that Apple's iTunes video is terrible 
by comparing resolution numbers with the DVD and HD specs. In reality 
however, resolution numbers don't convey how good a picture looks. 
Most TV watchers get their programming through cable or satellite 
providers, who heavily compress most content in order to squeeze in 
as many channels as possible. The result is that most digital TV 
looks no better than Apple's current "near DVD" programming in 
iTunes, and can frequently look significantly worse.
HD discs-and certain cable HD channels-are accorded enough bandwidth 
to easily outshine Internet downloads. However, the relationship 
between LD/SD and HD content isn't exclusive, and HD doesn't always 
offer an advantage.
Some content, particularly sports events and new movies with heavy 
CGI or dramatic cinematography-look awesome in HD. The problem with 
assuming that HD is the only future is that most content isn't or 
wasn't recorded in HD, or looks no better in HD. We don't listen to 
music in recording studios; we listen in outdoor concerts, in bars, 
over loudspeakers, and using earbuds. Similarly, there's a lot of TV, 
movies, and other video content that doesn't benefit from greater 
than SD resolution at all.
Apple happens to be positioned to ride the sweet spot of LD/SD 
content right now, and has the infrastructure and hardware to deliver 
HD content using the same iTunes ecosystem with Apple TV in the 
future. Apple has bet on the mainstream 720p HD format as the best 
balance between high quality content and downloadable file sizes.
That will enable the company to transition to offering HD programming 
from iTunes as consumer's bandwidth availability increases and the 
demand for HD expands. Until that happens on a large scale, Apple 
will continues to sell the most content because it has targeted what 
consumers want-convenient downloads-not what other vendors are all 
trying to sell: high end, high priced HD.
The Proof of HD's Slow Progress.

In October, DisplaySearch reported that both of the rival HD disc 
formats combined only held a 5% share of the market when compared to 
Standard Def DVD players. Up-converting DVD players, which output a 
pristine digital signal designed to look better on HDTV sets, are 
actually growing faster than HD disc players.
The significant difference in price between the two is greatly 
overshadowing the slight difference in visible resolution that 
Blu-Ray and HD-DVD offer over up-converted DVD for users of HDTVs 
with a 48" or smaller display. Moving from DVD to HD discs is no huge 
leap comparable to the chasm between VHS's 250 lines of analog 
resolution and DVD's 520. Many consumers haven't even yet seen how 
good of a digital picture DVDs can produce when unhampered by the 
constraints of the old NTSC TV standards and simple composite video 
cables.
While TV salesmen are trying to label the high end 1080p HD signal 
format as "true HD," very few HDTVs even support it. There are no 
1080p broadcasts, leaving practical HD at either a sharp 720p display 
or the interlaced 1080i standard. Despite being a bigger number, the 
interlaced display of 1080i typically means there will be more motion 
artifacts. That reality leaves HD only a minor improvement over the 
top of what DVD delivers. For viewers who sit ten feet away from 
their display, there isn't a real difference.
Estimates suggest that by the end of the year, there will be an 
installed base of about a million standalone HD-DVD and Blu-Ray disc 
players, besides the 7-8 million PlayStation 3 consoles that can also 
play Blu-Ray discs. That makes less than ten million HD players in 
total, compared to around 40 million video playing iPods, and 
hundreds of millions of iTunes installations capable of playing back 
iTunes content directly from a computer or through an Apple TV.
There are also only about 330 and 360 titles available on HD-DVD and 
Blu-Ray, respectively. Despite Apple's challenges in lining up movie 
partners, it now offers about 1000 movies from major studios and 
nearly 100 independent films. So while there is a lot of money and 
marketing behind HD, the commercial market for Low Def, portable 
video content and playback is simply larger than HD, even before 
adding in alternative content from podcasts.
Why Nobody Else Points This Out.

Without considering the real numbers involved, it would seem 
nonsensical to pit Low Def programming against HD. The facts simply 
buck conventional wisdom in a way that no commercial information 
source has any reason to highlight.
While iTunes already leads the delivery of LD/SD video, there are two 
new video-related businesses Apple is rumored to soon be pushing 
into. The next article will explore the first one: rentals.
How Apple Could Deliver Workable iTunes Rentals

http://www.roughlydrafted.com/2007/12/07/how-apple-could-deliver-workable-itunes-rentals/

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