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

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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