First the DVR-bashing MPAA came for our pay-per-view (Golden Goose Genocide: Hollywood Guns for DVRed PPV), and not too many people noticed. Now those troglodytes at the MPAA are looking to block the DVRing of recently released movies appearing on subscription HDTV services.
At the request of theatrical film makers, the Federal Communications Commission on Friday quietly launched a proceeding on whether to let video program distributors remotely block consumers from recording recently released movies on their DVRs. The technology that does this is called Selectable Output Control (SOC), but the FCC restricts its use. The Motion Picture Association of America (MPAA) wants a waiver on that restriction in the case of high-definition movies broadcast prior to their release as DVDs.
This is all about the various "release windows," where Hollywood films start their commercial sojourn in the local cineplex, and eventually work their way to DVD, cable/satellite and network TV. The MPAA says its request for the do-not-record exemption is being made in order that it can provide these movies to satellite and cable sooner, without the risk that DVR usage will eat away at subsequent DVD, Blu-ray or download sales. Once those other releases take place, the MPAA says the do-not-record blocks would be lifted.
Does anyone really believe this nonsense? If the movie studios are interested in releasing their products to the cable and satellite distribution chain earlier, it's not about altruism -- it's because they believe that doing so means there could be some extra money to be made. But clearly, the Hollywood bean-counters have done their risk analysis and they've determined that while there's definitely money laying unclaimed on the cable/satellite table, there's a possibility that taking this cash could mean less money from DVD/Blu-ray/download sales. So, blocking the use of DVRs with these early releases provides some protection.
A decade or two ago, Hollywood running to Congress asking for protection from itself would have been laughable. Today, it's business as usual -- and it's pathetic.
There are more than enough bad ideas enough to go around, But then, there are bad ideas that originate within our federal government, and while that means they tend to be fewer in number, they also tend not to die until some determined bureaucrat, legislator or judge figures out a way to foist them onto the American public.
So far, the FCC campaign for "a la carte" cable pricing, spearheaded by current FCC head Kevin Martin, is one of those bad ideas that has not yet morphed into the law of the land. But that doesn't keep Martin from coming back again and again with new twists on how to make it happen.
Martin's latest run against the ticking clock that is his term as FCC chairman would add a new wrinkle to a la carte pricing, in which cable companies would be allowed to drop from their expanded basic packages any channel where the programming provider required payment of more than 75 cents per month per subscriber. It appears that the thinking is that would result in lower prices for the most popular channels, and bring overall subscription prices down, which would presumably make it easier for cable companies to offer "a la carte" pricing.
While it's near enough impossible to argue against the desirability of lower cable TV prices, government intervention is anything but a sure-fire way of getting there. After all, the FCC has been responsible for regulating the cable industry for more than 20 years, and prices have consistently and impressively outpaced the Consumer Price Index during that reign. For example, the Bureau of Labor Statistics reports that cable TV prices have risen 77 percent since 1996, roughly twice the consumer inflation rate.
The problem with government and regulation is that it often starts with a flawed understanding of how markets and competition function, which leads to unintended consequences that typically make things worse, not better. There's plenty of evidence that this is true for the FCC and cable pricing.
People imagine that an a la carte mandate would mean that if they're currently paying $50 per month for 50 channels, then they should be able to pay $1 per month for one channel. But that doesn't make any sense. Switching a given customer from 50 channels to 1 channel doesn't reduce costs (the other 49 channels would presumably still be produced for other viewers), so why should the customer expect a lower bill? If anything a switch to a la carte actually makes things more expensive because in some cases cable companies have to install new equipment and set up a more complicated ordering and billing system to keep track of who had signed up for which channels. In reality, what would happen is that the cost of each channel would go up a lot. Instead of $1/channel, cable companies might charge something like $8/channel, with each customer choosing 6 channels on average. The result would be that most people would pay about the same for a lot fewer channels.
It's a mistake to think of bundling as being "forced" to pay for channels we don't want. After all, non-sports fans don't get outraged about the fact that they're "forced" to take the sports section with their morning paper. The right way to think about it is that you're paying for the parts of the bundle that interest you, and the rest of the paper is a freebie that doesn't cost you anything extra. It would be silly to demand that newspapers price each section of their paper separately and let you do without the sections you don't want. It's equally silly to demand that cable companies not show you channels you're not interested in watching, since those aren't costing you anything either.
There have been a number of recent research studies examining the current state of Sony's Blu-ray next-generation packaged media format, including one from Strategy Analytics a few weeks ago that was dissected here shortly after its release -- Is 29 Million Blu-ray Players by End-2008 Good News?
The key disconnect I found in the SA study is its forecast that 80% of all Blu-ray hardware sales this year are expected to be in the form of either PS3s or BD drives installed in desktop and laptop computers. Therefore, it was difficult to understand the basis for its conclusion that standalone Blu-ray players would suddenly become the leading contributor to BD sales beginning in 2009. This is sort of like a car that goes from 0 to 60 miles per hour in just 10 seconds, suddenly improving to 0-60 mph in less than 5 seconds, with the turning of calendar pages the only explanation offered for a massive change in performance.
Now, a new study by ABI Research suggests that PlayStation 3 will continue to be the main force for Blu-ray sales for another 5 years. As reported by Engadget HD:
Blu-ray still has a lot of convincing to do before ABI believes it's the future, mostly because of upconverting DVD players. According to the analyst's figures, while 35% of DVD players sold today (that low?) upconvert, 60% will by 2013 (again, that low?). The state of Blu-ray hardware going forward isn't to their liking either, with principal analyst Steve Wilson stating "studios better hope that people are playing movies on their PlayStations. Otherwise there's very little installed base." With PS3s accounting for 85% of Blu-ray players in 2008, ABI doesn't see things evening out until 2013, with high prices for dedicated players keeping sales volume lower than studios would like.
I'll concede that these sorts of research reports, in general, are notorious for getting things wrong, usually as a result of focusing on the predetermined needs and desires of the company underwriting or promoting the study, or by the researcher themselves, who are highly motivated to produce the sort of findings that generate widespread business and general news coverage. It's certainly possible that both Strategy Analytics and ABI Research have got it wrong, and that standalone Blu-ray sales are quietly gaining momentum and share against both PS3 consoles and upconverting, standard-definition DVD players.
But that's now how I'd bet things are actually going. And I think the key problem here is that after beating back the HD DVD challenge, Sony has taken a complacent "now we just build it, and they will come" approach to Blu-ray marketing. Maybe I'm missing the forest for all the trees, but about the only time I hear any mass market promotion of Blu-ray is the "...and now available in Blu-ray Disc" tagline added to TV advertisements for the weekly batch of new DVD releases.
And this seems especially strange to me, considering that Blu-ray promotion represents one of those made-in-heaven marketing opportunities, where promotion of one product (Blu-ray) provides positive and complementary promotion for a whole slew of other products, including Sony HDTVs, Sony A/V receivers, Tri-Star and Columbia Picture properties, and PlayStation hardware and software, among others.
But then, the lack of effort by Sony to grow consumer awareness and demand for Blu-ray is pretty consistent with how the entire rollout of both Blu-ray and HD DVD was conducted. There was then -- and remains now -- very little focus on consumers. The format battle was ultimately fought and won almost entirely behind the scenes, with corporate politicking and financial enticements to studios being the blunt weapons of choice. Consumer reaction to HD DVD and Blu-ray was little more than a sideshow.
While there's no question that this strategy worked admirably well for Sony in eliminating the HD DVD challenge, it will not translate to a victory in the consumer marketplace. It's hard to understand how Sony could be dropping the ball so badly.
It seems that something has gone terribly wrong in the HDNA.
If there's anything I've learned from more than 25 years of experience with broadcast (one-way) networks, you never have enough bandwidth to deliver all of the information you'd like to provide or that your customers expect. And while it's true that satellite operators such as DirecTV and DISH currently appear better positioned than cable in the bandwidth capacity stakes, I'd need more than rose-colored glasses to see that as anything other than a short-term aberration against the historical trend.
That's why I'm a bit skeptical about suggestions that satellite TV operators will begin be offering 1080p programming within the next 3 years. But that's what Eric Cooney, CEO of broadcast equipment manufacturer Tandberg, sees when he looks in his crystal ball, as reported by TV Predictions:
Cooney, whose company provides picture compression services, says satcasters are most likely to introduce 1080p because they have more system space than the cable operators.
"Today’s broadcasters have concentrated on 1080i or 720p and this will change. The Holy Grail is to shift to 1080p at 50/60 Hertz. Our current partners are asking us for this additional functionality in order to deliver a superb customer experience and operational advantage," he told Rapid TV News.
Make no mistake, I'm ready for DirecTV to start sending me 1080p programming. I hate interlaced video, regardless of the resolution, and I truly believe the biggest mistake made in the creation of the US ATSC system was to burden it with the tortured legacy of interlaced video formats. I also recognize the potential the competitive advantage here -- just look at the relatively new and growing focus on image quality that both satellite and cable competitors are making central to their advertising messages.
Still, I think this story is more about an equipment manufacturer talking up a market for future sales than meeting any near-term need by its clients. But this is one time I'd truly enjoy being proven wrong.
Wal-Mart and Amazon have belatedly joined Circuit City and Best Buy in offering "make nice" refunds to their customers who purchased HD DVD players. Wal-Mart is offering a full refund but requires the return of the HD DVD player, while Amazon is providing just a $50 refund, but allows its customers to keep the players.
Wal-Mart says HD DVD buyers need only to provide the player and their original receipt to get the refund; it's not necessary to return the box in which it came. The full refund offer is good until April 30.
Amazon is also doling out a $50 credit to anyone who bought Toshiba's folly after Feb. 23, 2008. Naturally, they're encouraging you to use it on a shiny new Blu-ray player, but you could use it to take advantage of their HD DVD fire sale. Unfortunately, they're not doing trade-ins, so this is all you're gonna get.
Note: Gizmodo is incorrectly reporting that the refund is available only on purchases that took place after Feb 23 of this year. In fact, Amazon is limiting the refund offer to purchases made before Feb 23, the day Toshiba announced that it was withdrawing support for the HD DVD format.
Gizmodo is reporting that Pioneer Europe has announced, as expected, the addition of a range of LCD flat panels to its popular Kuro brand products:
Pigs officially fly today: Plasma king Pioneer has announced their LCD lineup for Europe, and yep, they're getting the coveted Kuro distinction (equivalent to a "best TV on earth" badge) as is the already released KRF-9000FD LCOS projector. The 1080p LCD sets are on the smaller side (leaving big boy TVs to plasma) in 32, 37 and 46-inch sizes, with a 100hz frame mode and a "specially tuned" picture quality. But do they live up to Kuro?
The addition of LCD panels to Pioneer's product line-up has pretty much been a foregone conclusion ever since Sharp purchased roughly a 20% share of struggling Pioneer in 2007. But there's been much speculation about whether the Pioneer LCDs would fall under the Kuro brand umbrella -- and with good reason. Kuro is the Japanese word for black, and Pioneer's recent Kuro plasmas have set the standard for black level performance; on the other hand, middling black level is a long-standing Achilles Heel for LCD displays.
The more interesting bit of news coming from the Pioneer Europe press release is that the company is also adding an LCoS-based 1080p front projector to the Kuro family:
Developed specifically for cinephiles with a dedicated home cinema room, the KURO projector is configured for screen sizes starting from 60 inches. Aside from displaying signature KURO style cosmetics, it supports advanced calibration and is in line with the KURO benchmark of deep black levels and rich colours, resulting in the unmistakable look of film. It incorporates LCOS 1080p technology, producing the highest native contrast ratio. Based on 3 x 0.7 inch D-ILA, it boasts a wide lens shift capacity and dual HDMI 1.3 support.
The addition of the LCoS projector seems a bit of a non-sequiter in that this is neither a Pioneer nor Sharp area of technology expertise. Reading between the lines, it appears that the Pioneer projector is based on the well-regarded JVC line of "D-ILA" projectors. LCoS is a non-proprietary technology, but the two leading companies pushing LCoS products are Sony and JVC. Sony has branded its LCoS products "SXRD," while JVC has long used the "D-ILA" moniker (Digital Direct Drive Image Light Amplifier).
Gizmodo indicates that there's no definitive word on whether other Pioneer regions will be following the European lead in bringing LCD and LCoS Kuro products to market.
Gizmodo is reporting that the Dutch conglomerate Philips has taken the decision to exit the US television market:
If the rampant out- and cross-sourcing between LCD and plasma TV makers didn't tell you that it's a nasty and brutish time in the TV biz, this should: Philips is officially pulling out of the US market, and is licensing its brand name for TVs over to Funai -- best known for supplying Wal-Mart's Black Friday TVs and DVD players.
This might also tell you that Philips makes pretty crappy televisions.
This also feels like poetic payback for Philips foisting its Ambilight stupidity on US consumers, along with the insipid TV advertisements that it produced to promote its flat-panel displays with that so-called technology built in. While neutral bias lighting of certain types of televisions can be very beneficial, Philips' real-time, color-shifting Ambilight was an imaging science atrocity of the highest order.
Hopefully, Funai won't repeat Philips' mistakes by burdening its products and customers with Ambilight. But I'm not holding my breath...
Over at the Robb Report web site, Geoffrey Morrison has an excellent write-up on Mitsubishi's introduction of its much ballyhooed Laser TV technology. What surprised me (and definitely diluted the "cool factor") is that Laser TV is just a rear-projection DLP with a seemingly more futuristic light source:
A regular DLP based rear-projection TV has a lamp (think light bulb) that creates the light. This light is focused down and shown through a rotating color filter wheel. Single chip DLP systems, like what is found in RPTVs, create sequential color. That is to say, at any given moment, only one color is on the screen. Because these colors change rapidly, your eye and brain blur them together so you see a full color image...
Using lasers as the light source simplifies this process. Three lasers, red, green, and blue, are expanded to fill the DMD chip. The color is still sequential, but the lasers can turn on and off faster than any color wheel, so the "rainbow" effect should be unnoticeable. Removing many of the lenses in the light path makes the light engine less expensive to produce, as well as more efficient. A less powerful light source can be used to create the same amount of brightness.
It's interesting to see the significant commitment Mitsubishi is making to Laser TV, especially when the tide seems to be definitively moving away from rear-projection form factors to flat panels. Still, as Morrison notes, there is a definite bang-for-buck consumer benefit for rear-projection HDTVs, and perhaps with Sony, Hitachi and others exiting this market segment this will turn out to be good, near-term business for Mitsubishi.
But with Laser TV sales roughly 6 months off into the future, it's likely that the anti-rear-projection mindset will spread to more HDTV buyers. In the end, it may be that Laser TV may have to settle for a niche in the front projection market.
But the best part of Morrison's article is his concise and convincing explanation of how Mitsubishi's "Twice the Color" marketing blather is not just hype, but hype that actually torpedoes picture quality:
Most modern displays are capable of reproducing all the colors available in the HDTV signal. Many are designed to reproduce more than that, creating "oversaturated" colors. In a store, these displays seem to have lots of color, and often get purchased over displays with more accurate colors. What happens is green grass is really green. Red apples are almost candy red. Again, perhaps not a big deal for the average consumer, but for those looking for a display that just shows what is in the original material ("as the director intended") this oversaturation of color is an artifact.
The problem, in effect, is in the signal. As good as HDTV is, it doesn't have the ability to encode all the colors that the human eye can see. New technologies, such as xvYCC aim to expand this limited color palette, but these are a long way away (if ever). This is because every step in the chain, from the transfer, to the encoding, to the decoding, to the transmission, to the display, all need to be xvYCC in order for it to work. Right now the only steps that are xvYCC are the display and the Blu-ray player (if you're lucky). So it's a useless feature at the moment.
The web is abuzz today with news of a Strategy Analytics research report that predicts there will be more than 29 million Blu-ray players in consumer hands by the end of this year.
That sounds like it should be good news for anyone with a stake in the success of the Blu-ray format. But the fact is, the very report that paints such a rosy future for Blu-ray raises some serious concerns about that seemingly guaranteed success. I'll explain below why I think the Blu-ray glass is half empty, but first here's the key predictions from the Business Wire press release:
The Blu-ray Disc victory in its recent format war with HD-DVD will propel this technology into 29.4 million homes worldwide by the end of 2008, according to the latest research published by the Strategy Analytics Connected Home Devices service...
...[The] report predicts that global sales of Blu-ray devices will reach 18.8 million units in 2008, including 4 million stand-alone players, 13 million consoles and nearly 2 million PCs. By 2012, annual sales of all BD devices will reach 57.4 million units. The largest market will be in Europe, with 26.4 million, followed by the US (22.6 million) and Japan (8.4 million).
The elephant in the room here is the lopsided contribution that PlayStation3 game consoles are expected to continue to make to overall Blu-ray sales in 2008 -- approximately 7 out of every 10 new "Blu-ray players" to be sold in 2008 year are expected to be disguised as PlayStation 3 gaming consoles.
Make no mistake -- I really admire the PS3 "Trojan Horse" strategy and its critical role in forcing Toshiba and HD DVD off the battlefield. But that strategy doesn't make the cut as an end game. After all, the real value of the mythical Trojan Horse wasn't the deadly firepower of those hidden inside -- it was their ability to quietly open the fortress gates from within to allow entry to a larger invading force.
Taking this Illiad-inspired metaphor to the next step, you might say that Sony is having a really tough time on the enlistment front.
But just as unsettling is the idea that PCs with BD drives, a relatively new product category, will account for 2 million sales units, while sales of traditional, single-purpose dics players with Blu-ray technology will amount to a measly 4 million sales units.
When you add it all up, nearly 80% of 2008 "Blu-ray" sales are actually products that are first and foremost something other than a device designed to watch a Blu-ray movie. Strategy Analytics actually predicts that standalone Blu-ray players will be the main contributor for Blu-ray sales from 2009 onward, but no further details are available in the press release and the full text of the research report is only available by subscription.
It hard to see what's going to propel this fundamental change in fortunes for Blu-ray, seemingly overnight. Hopefully Strategy Analytics or Sony have the magic formula in hand.
AppleInsider recently reported on a patent filing by Apple Inc. that indicates the company may be planning to add DVR capabilities to its slow-to-gain-traction Apple TV product:
A series of Apple patent filings published this week reveal a version of the Apple TV media device capable of browsing and recording live television programming in addition to serving up pre-aired content from the company's iTunes Store.
Originally filed back in October of 2006, the filings clearly show considerable work on the part of the electronics maker to create an alternative to products like the TiVo digital video recorder (DVR), complete with a searchable on-screen guide and configurable touch-based remote control device that would serve as a portable program guide.
While I don't own any type of Apple product, I believe that a DVR product infused with Apple's world-class design and usability expertise could be an interesting and welcome addition to the DVR marketplace. TiVo seems to get all the media and online praise when it comes to DVRs, but I always felt that TiVo sacrificed utility and power in favor of ease of use. In effect, TiVo panders to the technophobic and gives short shrift to more savvy consumers.
So, it would be interesting to see how Apple might tilt the balance toward the DVR power user, without leaving the casual user in the dust -- it seems to me that this is what Apple does best.
But I suspect that the chances of Apple actually delivering a mainstream DVR product are close to zero. The best DVRs are joined at the hip to a content delivery system, as evidenced by the fact that TiVo's brightest moments -- both financially and from a product realization standpoint -- occurred during its partnership with DirecTV. It's little wonder that TiVo has struggled mightily since its relationship with DirecTV headed south.
Apart from the iPhone, Apple has no history of playing nice with others, and even a souped-up Apple TV with Apple-inspired DVR wizardry would be a non-starter if all it does is record and play back over-the-air TV and iTunes store content.
Still, it's interesting to ponder the possibilities...and I highly recommend checking out the complete AppleInsider article for the user interface illustrations.
ZDNet is reporting that a Columbia University professor has filed a complaint with the US International Trade Commission, claiming that several companies and related products, including Sony's Blu-ray technology, are infringing a patent she controls:
The U.S. International Trade Commission will launch an investigation into Sony and about 30 other companies on possible patent infringements related to Blu-ray disc players and other products.
The commission said Thursday on its Web site that the products involved are short-wavelength light-emitting diodes and laser diodes used in such electronics as handheld mobile devices, traffic lights, and high-definition DVD players.
The move is based on a complaint filed in February by Gertrude Neumark Rothschild, a Columbia University professor emeritus who is seeking to block imports into the United States of a range of products that she said were infringing her patent.
At this point it's impossible to know whether this complaint has any merit, or whether this will actually cause practical problems for Sony and the other companies named in the complaint. But this news fits a general trend, where patents are brandished like weapons, with more and more companies threatened with legal action in the hope of a quick and hefty payout. Some companies have even begun to build patent portfolios with the primary goal of creating a deterrent against patent warfare by competitors.
As an aside, I highly recommend the excellent Techdirt web site for anyone who's interested in really understanding the purpose and importance of patents and copyrights for society, and how recent legal and legislative developments are seriously undermining those ideals.
Broadband Reports is carrying a story this morning detailing a new policy that DirecTV will be imposing on customers who record pay-per-view programming via the company's DVRs:
DirecTV users tell us that the satellite provider has sent them an e-mail saying that effective April 15, DVR recordings of pay-per-view films will only be available for 24 hours after purchase. Apparently users who like to watch films over a few day span will be out of luck. Not exactly the smartest move from an industry that's keen to put a dent in piracy by offering a robust, consumer-friendly product. From DirecTV's website:
Effective April 15, 2008, DVR recordings of PPV movies will be available for 24 hours of unlimited viewing after purchase. Major movie studios have required that satellite and cable providers alike may no longer allow their customers to view these recordings for longer than 24 hours. During the 24 hour viewing period, you will continue to enjoy all of your DVR features such as pause and rewind.
It seems clear that Hollywood has completely lost any sense of proportionality and is determined to alienate paying customers through any and all of the substantial means at its disposal. There can be no logical rationalization for this sort of draconian measure, particularly after a customer has paid for a program he plans to view later. Why should the owner of the content care how long the recording program sits there prior to viewing? Or even if it's viewed hundreds of times before being deleted?
Does anyone really believe this is going to enhance sales or revenues of "protected" content?
It's news like this that makes me want to stand up and applaud when a company defeats Blu-ray's BD+ DRM less than 6 months after its rollout, particularly after some leading security experts estimated that it would take at least 10 years to crack BD+.
The bigger the target, the bigger the effort that will be undertaken to obliterate it.
Engadget is reporting that Best Buy is adopting a trade-in policy for Best Buy customers who previously purchased an HD DVD player from the retail giant:
Best Buy is following Future Shop, Circuit City and others in reaching out to casualties of the format war. In this case, anyone who bought an HD DVD player from Best Buy before February 23, 2008 can request a complimentary $50 gift card for each player. For those too traumatized to even look at their discontinued hardware and software, Best Buy also announced it's adding HD DVD players and media to its Trade-In Center program, starting March 21. No word on how much a player can net you, but once its updated, check BestBuyTradeIn.com to get an estimate and decide how much holding onto the past is worth.
Update: Best Buy just issued a press release with additional information about the more than $10 million in gift cards it plans to distribute, and details on how to make sure you get yours...
A couple of interesting wrinkles here. First off, Best Buy doesn't appear to be offering a full refund for HD DVD players, but unlike Circuit City they aren't requiring the customer to return the player. Second, it sounds like Best Buy is also accepting trade-ins for HD DVD discs, though it's not clear how much the discs will yield in terms of cash or trade-in-kind.
It's good to see Best Buy addressing the disappointment of customers who picked the wrong side in the HD Disc Format War. It's also interesting to see that they haven't merely copied the Circuit City policy and that they are providing a somewhat more flexible solution, though it's arguable that it's not as comprehensive as the Circuit City policy.
Engadget reports on Toshiba's exit from the HD DVD business and suggests the financial cost should dissuade other companies from entering into this sort of format battle in the future:
There are spicy meatballs, and there are spicy meatballs -- and now there's a figure that will be tossed around for decades to come, one which will instantly represent the caution companies should take when embarking on another format war: a billion dollars. At least that's what Nikkei is reporting that Toshiba's losses on HD DVD totaled in 2007 alone: a ¥100b, or about $982m USD. It won't drive Toshiba under or anything, but you seriously have to ask yourself, was it really all worth it?
Yes, a billion dollars is a lot of money, but some perspective is necessary here. The actual financial cost of Toshiba's foray into HD DVD is relatively minor in the overall scheme of things. A good illustration of that fact is that even after flushing nearly a billion dollars down the toilet, the company still produced an annual profit of $2.5 billion.
But the bigger point here is that you can't look at the billion dollar hit in isolation -- you have to take into account how much Toshiba might have made over then next decade if HD DVD had been the hit it hoped it would be.
It's ultimately about the risk AND the reward.
And there are "cost" factors other than money to consider. Even though Sony has successfully seen off the HD DVD challenge, it remains to be seen if Blu-ray can eventually attain the same level of consumer acceptance as DVD or VHS previously.
It's probably more important to the ultimate success of Blu-ray that the momentum lost as a result of consumer confusion and disaffection be recovered quickly now that Blu-ray stands alone. If that can't be accomplished, then the cost of the format war is much greater than the short-term health of one company's financial statement.
It's a little surprising that Australia, a country of only 20 million population, is the fourth largest national market for Pioneer Electronics. But that's what Pioneer Australia Managing Director Yasuo Sakuma claims in an interview that appeared at the Smarthouse web site on Wednesday -- and that lends a certain level of credibility to his comments about the future direction of the Japanese electronics company after last week's decision to shut down its plasma display manufacturing operations.
Sakuma noted that Pioneer will shift to Kuro-branded LCDs built by Sharp and new Kuro plasma panels built by Panasonic. He said Pioneer will continue to sacrifice volume for profitability.
Sakuma indicated that when Kuro LCDs roll out sometime late this year, they will be in the sub-50-inch range, with 32-, 42- and 46-inch models likely. On the plasma front, Sakuma indicated that Pioneer will continue to offer both 50- and 60-inch Kuro models.
"We have one of the best display engines in the world and our Kuro plasma display has won numerous awards because of this engine. Now we are working with both Panasonic and Sharp to transfer this technology into both our LCD TV's and our new thin plasma TV's. The Pioneer display engine is key to our success."
Sakuma also mentioned that Pioneer is considering establishing Pioneer-branded retail outlets, though for a company that seems hellbent on reducing costs and increasing margins, this would seem somewhat counterintuitive.
Gizmodo is reporting that Blu-ray player prices are on the rise:
I suppose that it is not all that surprising to find out that without competition from the HD DVDs camp, prices for Blu-ray players have gone up. According to data collected by Pricegrabber.com, Blu-ray players have hit a high average of $400 per unit for the year -- about the same price they were at this time last year. This comes after the aggressive price cuts Blu-ray manufacturers employed at the height of the HD DVD battle.
A spreadsheet screen grab accompanying the Gizmo news item shows that the Samsung BD-P1400 player is now selling at $374, versus a low of $301 on January 10, with similar increases shown for the Sony BDP-S300, now selling at $403, versus $307 at the 2008 low (Jan 1); the Sharp BD-HP20U at $440, versus a low of $325 (Feb 15); and the Panasonic DMP-BD30K at $480, versus a low of $401 (Jan 1).
The data at the Gizmodo site (via Pricegrabber) also shows that the LG BH200 combo Blu-ray/HD DVD player debuted at $999 on January 1, bottomed out at $599 on February 1 and now sells at $666.
While Gizmodo is correct about the price increase resulting from a sudden vacuum of competition, there's another angle here that should be beneficial to consumers over the medium to long haul. Rising prices for Blu-ray players are likely to encourage increased manufacturer support for Blu-ray, resulting in a greater variety of players and performance levels.
All consumers appreciate falling prices, but sometimes it's good for prices to go up in the short term, as it gives manufacturers an incentive to pay more attention to a market, with the likely long-term result being broader choice over a wider range of price points.
In fact, the beginning of the end for the HD DVD format occurred precisely at the moment that Toshiba began aggressively slashing HD DVD player prices, as it guaranteed there would be reduced manufacturer interest in the format. Since Toshiba was virtually alone in building HD DVD hardware to begin with, there was little chance that any other manufacturer would support HD DVD when prices dipped to under $200 and eventually went as low as $99 prior to Toshiba tossing in the towel.
Comcast CFO Michael Angelakis today said his company has the capacity to offer more than 150 High-Definition channels.
That's according to an article by Dow Jones News Service.
The wire service reports that Angelakis made the remark while addressing the Bear Stearns Media Conference in Palm Beach, Florida.
Comcast now offers less than 40 HD channels in every market, with some systems getting as few as 25-30. But Angelakis said "not every HD channel deserves to be in HD, and there are lots of HD channels that aren't watched very much."
This is also a good example of why Fortune 500 CFOs should leave marketing spin to the marketing experts.
Hot on the heels of news that Circuit City may in fact be offering up a hush-hush trade-in program for HD DVD purchasers comes official word that said retailer is tripling its standard return window in order to appease early adopters. According to company spokesman Jim Babb, it's looking to "take care of [its] customers" by lengthening the return window from 30 to 90 days for all HD DVD player purchases. When returning the unit, users are given store credit...
I have to rate Circuit City's actions here as an extremely savvy way of building customer loyalty. Although there's no doubt a financial cost to Circuit City for taking on this policy, the impact, in view of the relatively small number of HD DVD players sold to date, should pay off in multiples in a fairly short time.
The question now becomes, will we see Best Buy and Wal-Mart, along with the major regionals, adopting similar policies? If that's going to happen, we should know in a few days.
I still think this is something that Sony should be doing on a top-down basis, as the company and the Blu-ray format are both in need of positive PR. But as it stands now, it's looking like this will go down as an opportunity missed for the slumbering electronics giant.
Fox Sports announced Thursday that it will produce and broadcast its entire Major League Baseball package in HD, including this year’s All-Star Game at Yankee Stadium July 15.
The consistent HD coverage begins April 5 with Fox’s first Saturday Baseball Game of the Week of the upcoming season.
What's actually most notable about this FOX Sports press release is what's been left unsaid -- now that FOX Sports is providing all of its MLB coverage in the 720p HD format, this appears to be the end of the road for the company's ill-conceived, pseudo-HD "FOX Widescreen" format experiment.
Back in 2002, both FOX Sports and its parent FOX network were steadfastly resisting HD broadcasting, which News Corporation chairman Rupert Murdoch told a US congressional hearing was "a waste of bandwidth." Instead, FOX attempted to establish an "upconverted," widescreen presentation of basic NTSC images as a "good enough" substitute for genuine HD programming.
The early adopter market was brutal in its quality assessment of FOX Widescreen, and once it became clear that the momentum toward full HD broadcasting was unstoppable, FOX bit the bullet and began producing true HD programming.
FOX Widescreen has lingered on the scene well past its due date, as the network had continued to deploy it for those occasions where it was doing a live sporting event without HD mobile cameras and crews. For the past couple of years, the primary use of FOX Widescreen had been regular season baseball broadcasts. Now that FOX is stepping up and providing all of its MLB coverage in true HD, FOX Widescreen appears to be a thing of the past.
There's been a lot of rumor and speculation in recent days that Circuit City is accepting returns of HD DVD players it sold, providing its customers with a credit toward the purchase of a Blu-ray player. This speculation seems rooted in fact, at least based on a report late Wednesday from Gizmodo:
According to a Circuit City employee in Chicago, the consumer electronics chain is trading in HD DVD players bought into their stores "within 3 months of the announcement," as opposed to their 30-day return policy. According to the internal memo announcing the demise of the format, they will either give customers a Blu-ray player —- paying the price difference, if any —- or a gift card. The trade-in, however, will not be widely promoted and it will be only made available if the customer asks for it.
Although the HD Disc Format War is ended, Blu-ray has a LONG way to go before it is embraced as the marketplace successor to the original DVD format. The fact that something less than 50% of households have an HDTV capable of fully exploiting the new format is a fundamental challenge, but it's also true that there's significant consumer inertia in favor of the original DVD format. Movie downloads are also poised to become more popular over time.
But it seems clear that the biggest near-term challenge and opportunity facing Blu-ray over the next year is to find a way to soothe the bruised feelings of the unlucky millions who put money into HD DVD players and discs. By definition, we're talking early adopters, and the best thing Blu-ray can do to build some immediate momentum among these opinion leaders is to turn them into Blu-ray owners/advocates.
While the actions of Circuit City are smart business and in line with similar "swap" programs reported earlier in Japan and Switzerland, it would be even smarter if Sony, as the Blu-ray group ringleader, adopted a similar, worldwide trade-in program, but also extended it to HD DVD-for BD disc swaps.
While it's crystal clear that Sony has no moral obligation to insulate HD DVD buyers from the inevitable format war fallout, the fact that the HD DVD population is relatively small and Blu-ray's success a long way from assured, makes this something close to a "no brainer."
After all, if it's good business to pour hundreds of millions of dollars into movie studio coffers to attract exclusive Blu-ray support, doesn't it make sense to follow through and make sure those investments pay off?
According to a Reuters newswire report, in follow-up to a story originally reported by Nihon Keizai Shimbun (NIKKEI) in Japan, Pioneer is expected to make a decision soon on ceasing manufacturing of the plasma panels used in its Pioneer- and Pioneer Elite-branded HDTVs.
Japan's Pioneer Corp is finalizing plans to stop all production of plasma display panels in a bid to turn around its loss-making flat TV operations, an industry source briefed on the plan said on Tuesday.
Shares in the maker of audio-visual products and auto electronics jumped to a four-month high after first reports of the move, and were up 11.2 percent at 1,160 yen as of 12:50 a.m. EST.
Pioneer is the world's fifth-biggest plasma TV maker, but it has been struggling to compete with larger rivals with better output efficiency such as Matsushita Electric Industrial Co (6752.T: Quote, Profile, Research), maker of Panasonic-brand electronics.
After the move, Pioneer plans to buy plasma panels for flat TVs from Matsushita, the Nikkei business daily reported. Pioneer is already planning to buy liquid crystal display panels from Sharp Corp (6753.T: Quote, Profile, Research) to start offering LCD TVs.
That's how it went for the cable TV industry this week, as Federal Communications Commission Chairman Kevin Martin was forced to beat a retreat from his widely publicized plan to expand the scope of the FCC's regulatory power over the US cable TV industry under the so-called 70/70 provision.
While that would seem to be cause for relief for cable TV executives, Martin has instead put forward a compromise plan that, if adopted at the FCC's next meeting Dec 18, would result in the FCC placing a limit on the number of customers nationwide that can be served by any single cable television company.
If this is compromise, it makes one wonder what sort of draconian regulations Martin would have unleashed on cable TV had he been able to push through his 70/70 plan.
I'm no fan of the cable TV industry, but it's difficult to see how this sort of arbitrary cap on any company's growth potential would benefit consumers. And I'll go further out on the limb and say that I don't see any obvious consumer benefit to areas where the FCC has traditionally regulated the Pay TV industry.
But leaving that broader rant aside, it really doesn't seem to make a lot of sense to limit the size of any single cable TV company, particularly in an environment where there's more and more competition for pay television dollars.
The real problem here is one of the key issues with government regulation in general -- controls and restrictions are being driven by the demands of competitor companies in an industry or related industries, rather than any legitimate need or genuine desire to protect consumers.
It's not really surprising that Sony Corporation CEO Howard Stringer has publicly backpedaled from his recent comments that the HD disc format war is a "stalemate" that "doesn't mean as much as all that."
So now Stringer's out there setting things right, by saying Blu-ray has "momentum and scale" and "I think Blu-ray is just a better format."
Blah, blah, blah...
I believe Stringer's original, unsanitized comments are probably a lot closer to his true, gut feel as a businessman about the HD disc marketplace. And I think a stalemate is exactly what Toshiba is aiming to bring about through its aggressive price-cutting. The way I see it, Toshiba can't win at this point, but it can inflict plenty of damage on Sony whether it follows Toshiba downmarket on player pricing or not.
I think there's also something fundamentally untenable about a continuing stalemate. The market for a product this new generally won't function efficiently without realistic prospects for dramatic near-term growth -- businesses play the game to make money. This truth applies to all parts of the product food chain here, from the format "owners" at the top of the pile, down through the movie studios, the pressing plants, and the retailers and rental outlets. If neither format can take command of this market and accelerate the number of units moving into consumers hands, then key parts of the chain will lose interest and look for better places to invest their time and money. From there, stalemate quickly becomes defeat.
As a result, I believe that Sony and Toshiba must get together and work out a long-term HD disc alliance.
Federal Communications Commission Chairman Kevin Martin told the New York Times last weekend that he believes the cable television industry is now subject to increased regulatory scrutiny under the so-called 70/70 rule. This 1980s-era provision kicks in when cable television becomes available to more than 70 percent of homes nationwide, with 70 percent of those capable of receiving it actually subscribing to it.
I'm not a statistician, but it's difficult to understand how this regulatory wrinkle has suddenly come into play in a pay TV environment where cable television's market share has progressively shrunk in light of satellite TV gains over the past decade. And now there's even more competition to cable TV, with the arrival of teleco TV providers such as Verizon and AT&T.
Don't look now, but no one is running to the defense of Chairman Martin's prototype pocket calculator-cum-time machine.
More interesting is the speculation that Martin's 70/70 talk is designed to provide leverage that would aid him in making another run at mandating an "a la carte" pricing system onto cable TV providers -- "a la carte" would allow consumers to select and pay for only the channels they wish to view.
Although Martin has said he's not focusing on "a la carte," the 70/70 saber-rattling is widely viewed as an attempt to gain leverage over the cable industry in this and other upcoming regulatory battles.
Announced at the Consumer Electronics Show this past January, Warner Home Entertainment initially planned midyear releases of its Total HD product, a dual-format disc containing a movie in the HD DVD format on one side and Blu-ray on the other. Those plans were subsequently pushed back into early 2008, but now Warner tells High-Def Digest it has no current plans for Total HD releases.
Sony's CEO calls the HD DVD-versus-Blu-ray format war a "stalemate" that "doesn't mean as much as all that"... Following Nielsen's recent lowball estimate of HDTV households, Leichtman Research ups the ante... HD Net sues over DirecTV's move to push the pioneering network's channels into a secondary HD pay package... Blu-ray's DRM protection is cracked -- not for the first time and likely not for the last... Flat panel HDTV prices are stablizing, and LCD and plasma TVs earn top marks for reliability... And Nintendo's Wii is keeping it simple.
Click the Read More link below to find out more about these and the other leading stories in home entertainment in the latest edition of The Weekly Rewind...
Naturally, most observers, commentators and analysts have swiveled their attention in the direction of Sony and Blu-ray, looking for the next price cut gambit. But so far Sony doesn't appear inclined to play "follow the leader," if it means jumping off the edge of a cliff.
It's been recognized for some time now that reliable, authoritative data on the number of US HDTV households is elusive. Up to now, the most often-quoted data has come from the Consumer Electronics Association, and that trade group's most recent estimate puts US household penetration at 32% (36 million homes), with that share predicted to increase to 36% by the end of this year.
Now, Nielsen comes along and releases a new survey that pegs current HDTV penetration rate at less than half the CEA figures.
Earlier today, JupiterResearch released a new market research report that paints a pessimistic future for the purveyors of Blu-ray and HD DVD hardware and software.
While the conclusions of the report may turn out to be more or less correct, the findings ignore the two most important factors in any forecast for this market -- one, the inherent incompatibility between the competing formats; and two, and the apparent failure of the new formats to generate genuine, broad-based enthusiasm among the trend-setting "early adopter" demographic.
By any measure, the past week has been something less than "Comcastic" for the US market's largest pay television company.
The first warning signs that things were going wobbly at Comcast emerged late last week, when separate investigations by the Associated Press and the Electronic Frontier Foundation revealed that Comcast appeared to be routinely interfering with -- without directly blocking -- certain types of network traffic being generated by its broadband Internet customers. The first Comcast customers to notice the problem were users of the file-sharing software BitTorrent. While it was these grumbles that set off the AP and EFF sleuths, it was eventually determined that Comcast's actions were also impacting traffic generated by Gnutella and Lotus Notes.
It appears that whatever Comcast is doing is motivated primarily by network traffic management concerns rather than a desire to play undercover copyright cop. But because Comcast executives have stonewalled and have reportedly instructed its customer service staff to do the same, no one really knows for certain what's going on or why. This clearly falls into the category of avoidable and fixable problems, but the public relations beatings are likely to continue until Comcast embraces truth and accountability.
Then, on Thursday of this week, Comcast released its third quarter earnings report that revealed the loss of 65,000 basic cable subscribers during the quarter and slower-than-expected Internet access sales along with higher-than-expected capital spending -- all in all, a bad combination. Comcast investors reacted quickly, marking shares down to a 52-week low, which dragged other cable company stocks down in concert.
As noted in last week's review, Comcast previously announced plans to increase cable subscription prices by up to 7.5 percent, based in part due to higher costs related to HD programming. Increasing prices and attributing it in any way to HD programming seems more than somewhat ill-advised in light of the ongoing rollout of dozens of new HD channels by DirecTV (more than 70 at the moment, with at least 100 promised before the end of the year).
But the Comcast rationale for that became a bit clearer this week when Comcast President Steve Burke told financial analysts "We are clearly the high-def leader." Burke justified his claim by saying that Comcast serves more HD subscribers than DirecTV and DISH Network combined. Comcast is the largest pay TV provider in the US, at 24 million subscribers, compared to 16 million for DirecTV and 13 million for DISH Network.
While it's certainly possible that Comcast would have a higher HD penetration than either DISH and DirecTV alone, a claim that it has more than both combined just don't add up. Of Comcast's total subscriber count, only 13 million are "HD ready" digital subscribers, while all DirecTV and DISH Network 29 million subscribers are digital. This means that Comcast would need to convert digital cable subscribers to its HD package at a rate nearly 2.5 times [Edit: shud be nearly 1.5] higher than its satellite competitors. Because none of these companies break out their HD subscriber numbers separately, no one knows for sure what sort of HD customer conversion rate these companies are achieving.
But the Comcast HD subscriber claim, lacks credibility and smacks of wishful thinking -- the same sort of wishful thinking that leads to the belief that its Internet controversy will go away as long as the company continues to ignore it.
DirecTV continues to plug away on its HD programming expansion plan, as it rolled out 18 new HD channels during the past week, including FX, Cartoon Network, HGTV, Fuel, Speed and the recently launched Fox Business News Channel. The satellite TV provider also added six HD pay-per-view channels and six regional sports networks.
The most recent additions brings DirecTV's version of its HD channel count to more than 70, and while it may be valid to dispute whether regional sports networks and limited access East/West Coast networks should count as national channels, there's no question that DirecTV can, at last, make a legitimate claim to being the US leader for HD programming. At this point, DirecTV's only credible HD challenger is DISH Network.
While HDTV penetration remains at only around 30% of US households, that number is rising steadily and if 2007 holiday season HDTV sales are anything like 2006, a near-term increase to 40% penetration seems inevitable.
This raises some serious questions for the rest of the pay television industry, in particular for cable television. While the leading cable TV providers have been selectively trickling out new HD channels in the wake of DirecTV's flood of HD additions, this week was relatively quiet on the cable front. And the industry consensus seems clear -- cable TV will have trouble keeping up with DirecTV .
It's certainly true that some of DirecTV's recently launched HD channels are marginal, with relatively little true HD programming (I'm looking at you, CNBC). But just like the HD DVD versus Blu-ray tangle, the unfolding HD war is ultimately a public relations battle.
But unlike the consumer indifference directed toward the "HD Disc Wars," there's more interest here, as well as the fact that there is quite a lot of money up for grabs. Consumers are clearly sizing up these developments, and if the chatter on Internet discussion boards is anything at all to go by (always a question mark), cable TV customers are restless and many appear to be seriously considering a switch to satellite, with DirecTV getting primary consideration.
The cable television industry has been banking on the "stickiness" of its "triple play" bundle, and some providers, such as my local cable TV monopolist, Charter Communications, are clearly more focused on telecom services (Internet and local phone) than video. No doubt there is value in being able to offer this sort of one-stop shopping. But if the video options in that bundle are lacking, the convenience and discounted package deal may not be sufficient to win the day for consumers who just dropped a couple thousand dollars on a new HDTV.
So, maybe the triple play devolves into a double play?