[opendtv] Analysis: Let the Marketplace decide...

Now that I am back from NAB I'm trying to catch up with activities on the OpenDTV list among other things.
There have been a number of threads that cover some of the same old ground regarding modulation, the intent of the CE industry, and consumer interest in DTV in general.
I found this NAB to be one of the most interesting in recent years. Some of the sub-markets that are represented in the various halls of the exhibits are surging forward... 

Some are still dying.
Perhaps the most interesting phenomenon at NAB was the continuing interest in the RED camera, which is showing progress, but still largely vaporware. There was a line snaking around the booth during the entire show. They were letting people in much as the bouncers do at a popular nightclub. Once inside people we able to see more advanced prototypes of the camera, and a demo reel that some who saw it claimed to be the best quality video they had ever seen.
On my flight back from Vegas I sat next to Rex Metz, an ASC Cinematographer who is now a professor at the The College of Motion Picture, Television and Recording Arts at Florida State University. He noted that there was a line to put down deposits for the purchase of Red cameras that was almost as long as the one snaking around the booth. The college placed orders for two Red cameras at NAB.
The RED phenomenon has strong parallels with another company that helped to fuel a revolution in the video production business a bit over a decade ago. That company was Newtek, which, with the help of a sassy red head named Kiki, who was turning heads with her live demos of the Video Toaster. Looking back, it is still difficult to decide if it was Kiki's Sharon Stone tactics or the amazement that one could put a "digital production studio"on a card that fit inside an Amiga. What eventually became clear was the the economics of video production were about to change in dramatic ways, in essence "democratizing" the world of video production. As if to bring home this point, Apple announced that it has sold more than 850,000 seats of Final Cut Pro...
And I thought we were doing good at GVG selling 1,000 Model 100 video switchers in the first year after the product was introduced in 1984... 

;-)
Looking at the people lined up to see the RED camera, one gets a sense that the same thing is about to happen to the production of feature films. Never mind that the camera is just a tiny component of what it takes to produce a feature film. The real threat to Hollywood is not piracy, it is the empowerment of a new generation of artists, producers, cinematographers, editors, et al, to compete with companies that have built their empire on oligopoly control over talent, and distribution.
One thing was clear at NAB... we have reached the tipping point in the transition to HD video production. While aspiring cinematographers are lining up to spend $20,000- $40,000 for a camera designed for feature films, the growing hoards of independent video producers are jumping on the HDTV bandwagon.
The irony is that this has little to do with quality - going "widescreen" and format flexibility are the driving forces. As Mark Schubin correctly noted, the quality of HD acquisition systems is not generally improving, although there were a few bright spots at NAB. The market is being driven by the perception (and reality) that the ability to capture in HD is now a pre-requisite for survival. Many of the HD cameras are less capable than the professional SD acquisition systems they are replacing.
I remember the work we did in the early '90s, trying to influence the U.S. HDTV standard, and the recommendations to the ATSC that we get rid of interlace and focus on EDTV resolutions (e.g 1024 x 576). Many of the new HD cameras are using sensors with 960 x 540 resolution, which is then upconverted to 720@60P or 1080@60P for internal processing...
From there any of the SD and HD emission formats can be created, satisfying those who are more interest in numerology than the final results on the screen.
Another thing that has been discussed for years, that was openly acknowledged at NAB, is that the legacy Broadcast television model is dying. This is no longer speculation - broadcasting is losing its audience, and cable and DBS are NOT the major factors. The entire business model of aggregating content for channel surfers is dying.
While this business model is on the wane, broadcasting is far from dead. The cash infusion from retransmission consent agreements has given the industry new life, and more important, new respect from "The Street," that it is a business worthy of new investment.
The prospect that broadcasters might actually be able to compete in the emerging "Mobile TV" markets is creating the perception that there may be other new revenue stream just waiting to be exploited, to replace the legacy revenue models. 

This played out in many ways at NAB.
One of the most interesting manifestations was the "Keynote chat" with Dr. Eric Schmidt, the CEO of Google. The announcement the day NAB opened, that Google had cut a deal with Clear Channel to sell up to 30% of Clear Channel's radio spot inventory was not lost on the NAB audience.
Advertising clearly is not a dying business - adapting advertising techniques to emerging technologies lies at the very heart of "the transition to digital." Among other topics, Schmidt was grilled about the copyright issues surrounding YouTube and the characterization of the Double Click acquisition (by Microsoft) as the growth of Google into a fearsome monopoly. Schmidt had a great deal of fun with this - bottom line, he noted (and I agree with him) that the success of Google, and any other business for that matter is grounded in consumer perceptions. Google simply cannot hope to grow by compromising its relationship with consumers. Contrast this with Microsoft, which is using its monopoly powers to pad the bottom line, as it pisses consumers off and begins to lose its iron grip on the marketplace.
NAB is somewhat unique, in that much of the audience is creative types, but there was a clear trend that played out across the show floor. A few years ago the only place you would see MAcs was near the Apple booth - PCs handled just about everything else, and most of the notebooks being carried by attendees we PCs. Now Macs are proliferating around the convention exhibits, and most of the notebooks that people are carrying around are Macs. Of far greater importance is the growth of third party products that complement and leverage Apple's product offerings.
Toward the end of Schmidt's interview, some venture capitalists came to the microphone seeking some advice from the head of the company that has revitalized interest in investments in emerging technologies. In essence the questions were "What's Next? What should we be investing in?" 

Schmidt answered slowly...

Well first, there's MOBILE.

Then there's MOBILE.

And finally there's MOBILE.
The race is on to reach consumers in new venues when they are NOT at home watching TV or surfing the Internet via their computers.
Schmidt characterized the ability to reach consumers via "mobile technologies" as the next big thing. This obviously includes cell phones and Blackberries, but he also talked about notebook computers and vehicles as venues for new services. This sentiment was echoed by companies seeking to penetrate this emerging market like MediaFlo and Modeo, and the proponents of the ATSC mobile systems being demonstrated at NAB, which stirred up significant discussions on this list. 

The real challenge for broadcasters is how to reach this market.

Can they do it on their own?
Can they do it by partnering with the mobile services like Media Flo?
And will this all happen via standards groups, or is the industry ready to take off the shackles and get serious about competing in the marketplace?
In what may be the greatest irony of all, I heard broadcasters and suppliers talking seriously about "letting the marketplace decide."
In the context of the ATSC mobile demos, my impression is that the ATSC is not likely to be the focus of standardization efforts. It appears that Harris is ready to take the MPH technology directly to the marketplace, bypassing the ATSC and FCC. In essence the system does not require any authorizations - what it needs is supporters who are willing to make the investments to create a real market for the services.
In many discussions, the Open Mobile Video Coalition was cited as the first serious effort by broadcasters to work together to build a new business model.
I have been waiting for more than a decade for broadcasters to stop using standards groups and regulatory shields to protect the legacy business, and begin to work on the REAL DTV Transition.
As for the mobile demos, I have only a few things to add to what Mark Schubin and Mark Aitken have already described.
First, the little portable receivers demonstrated by Samsung during the AVSB mobile demo are a modified version of an existing product being sold in Korea. These receivers work with the terrestrial component of the mobile DTV system now on the air. They have two dipole antennas about 5-6 inches apart at the top of the units. They were receiving the quarter rate broadcasts and worked fairly well, but nowhere near as well as the receivers being used for the main demo. I noted many glitches under various conditions - but overall they seemed to work well enough to by a viable product. It is less clear how well they might work with the 1/2 rate broadcasts, which offer the twice the payload for any given bit penalty.
One thing that was not discussed much here was the SFN portion of the AVSB demo. This was based on three low power cells - two located at hotels near the convention center and the third inside the convention center. According to the Samsung techs on the bus the signal from the convention center was not much of a factor due to building attenuation. The SFN broadcasts appeared to work every bit as well as the high powered broadcast from Black Mountain. I don;tt think that the importance of this can be downplayed - it will be interesting to see how Harris reacts to this.
Also of interest was the fact that the Harris demo worked with a single dipole antenna rather than diversity antennas.
Of greater interest to me was the ability to receive the main channel broadcasts. These signals would break up whenever the buses moved, but would quickly lock up when it came to a stop, even in the "urban canyons" of the strip. And when we were in open areas they would sometimes lock up, even when moving.
One reason that I found this interesting was the results of some tests discussed by Rich Chernock with Trivenni. They put together a demo of some data broadcast services optimized for mobile consumers, especially in-vehicle receivers. These services included city guides, restaurant guides and traffic reports. They tested these services with standard ATSC receivers installed in vehicles to determine how much data could be received reliably. As it turns out, a surprising amount of data can be received while vehicles are stopped at intersections and in certain cases while moving. When vehicles are parked they can capture almost everything. Combine this with persistent storage in the vehicle, and one can easily imagine that you could get in the vehicle for the commute and all of the services would be up to date, and that additional updates could be received during the commute. Add one of the mobile in-band systems into the mix and it is clear that delivering services to vehicles can become a viable business.
Bottom line, it is now apparent that U.S. broadcasters may be able to develop new markets via mobile services. The question is how they can get this business off the ground, and whether they will compete or collaborate with the new mobile services that will primarily use the reclaimed 700 MHz spectrum. 

Several issues surfaced at NAB.
First, many broadcasters are looking at mobile services as a premium subscription service - a way to generate new revenue streams. In the context of rights for programming, this means that the content creators will be cueing up for a share of the revenues. Media Flo Modeo and other new mobile services are signing up national services that parallel what has happened with cable and DBS. To date they have not had much success getting local services into their systems.
Broadcasters could use these new service to deliver their bits, OR they could use their own spectrum to deliver the bits, either competing with the new services, or complementing them as they do today with cable and DBS. This raises significant questions about the design of mobile receivers. The options are: 

1. Let the new guys broadcast the bits using OFDM chips in the receivers.

2. Compete by getting the CE industry to build ATSC mobile receivers.

3. Complement by including both OFDM and ATSC Mobile chips in the receivers.
You can forget all of the noise on this list about what works and what doesn't. The reason for the lack of portable ATSC receivers is obvious. Consumers are abandoning the legacy broadcast business model in droves - investing in a portable DTV receiver is viewed as a dead end. That being said, consumers are investing in notebook computers in droves - they are outselling desktops, and adding services to these "portable receivers" is viewed as a viable market, hence the limited success of USB ATSC tuners.
Getting into mobile handsets is going to be a major challenge for broadcasters. These devices are adding all kinds of functionality that is epitomized by the new Apple iPHONE. Can broadcasters get on this bandwagon, or must they compete with single purpose portable DTV receivers?
The options outlined above are where the real action is going to be - the Mobile Open DTV Alliance could be a major player in this area, IF they can get broadcasters support and more important, the investment needed to make a new business viable.
Also heard many times at NAB and in private conversations is the ability of consumers to subscribe to programming on an Ala Carte basis. IMHO this is where the real battle will play out regarding the continued existence of cable analog tiers. Chariman Martin did not make it to NAB, instead he was testifying at a Congressional hearing, telling our elected representatives that they need to legislate "ala carte."
Ala Carte could be a major disruptive force, perhaps enough to topple the house of cards that the broadcast, cable and DBS industries have built. In fact it could be their salvation, as consumers are becoming aware of just how badly they are being screwed by the current model where they must pay for stuff they do not watch. As subscription TV services continue to become more expensive, the stage is being set for a dramatic shift to downloading content on a fee basis. Add to this the growth of Google, which is demonstrating the ability to target individual consumers via multiple technologies, and one can see that the business model of aggregation of content into subscription service may be just as threatened as the legacy broadcast TV business model. 

Dan Grimes captured this in a single question:
Why not offer a 'download and burn' service for the customer at their own home?
I'm not all that sold on the idea of burning content onto DVDs, although I acknowledge that this will be 'one" form of local storage. What I am sold on is the idea that I will "subscribe" to the content that I want. In essence I do this now with my DVR, marking the programs I want to watch for recording. If I can extend this to paying only for the stuff I want, I could easily move to a model that combines downloads of non-real-time content and fees for the stuff that I want to watch live. 

I guess I have rambled on enough.
Rather than just responding to this thread in total, let's try to create separate threads that focus on specific issues raised here. I look forward to some interesting discussions. 

Regards
Craig



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