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Broadband TV - One Niche at a Time

Broadband TV - Taking the Public By Storm One Niche at a Time
Colin Dixon, Senior Consultant, IPTV Practice Manager

September 21, 2006

What I Learned at IBC

While visiting IBC in Amsterdam two weeks ago, I attended a conference session in the Multi-Media in the Connected Home track called 'The Markets - Integration or Disintegration.' The panel discussion inevitably turned to the much-debated subject of broadband video on the television. The Microsoft representative on the panel argued that it will be "decades" before broadband video reaches the TV and becomes a mainstream phenomenon.

His argument centered on the generally accepted notion that the so-called "late majority' - a segment which in theory comprises over ½ of the mainstream consumer market - is typically very slow to embrace new technologies1. According to this principle, one would expect that for many people - especially mainstream consumers who have become quite comfortable with the TV they have known and loved for decades - are unlikely to embrace a radically different medium of delivery.

While this insight seems commonsensical, the late majority has proven to be surprisingly agile when something compelling comes along that appeals directly to them. Witness the speed with which this segment has embraced the Internet. In an extremely short period of time, even the 'wait and see' late majority has flocked to the Internet, enjoying the convenience of online shopping, the immediacy of Internet messaging, and the virtual interaction of online social communities.

1. This is a well-known tenet of Everett Roger's diffusion theory (see The Diffusion of Innovations ), one used by Geoffrey Moore in his book, Crossing the Chasm (and without proper credit given to Rogers ).

New Solutions Positioned to Push Broadband-TV to the Masses

Is there sufficient reason to believe that consumers (whether the late or early majority) will respond similarly to Internet TV? This is a question permanently inscribed on every white board in Hollywood and Silicon Valley . Microsoft seems to have an opinion, one surprisingly pessimistic for a company involved so heavily in Internet and IP media.

In order to answer this question, we must first take note of the complexities involved in actually connecting a television to the Internet. Today there are basically two options: a direct connection via a broadband-enabled set-top box, or a LAN-based connection where the PC or another server transmits the TV signal over a home network to a TV or display device.

The first option is relatively straightforward and involves little complexity. This method of connecting the TV to the Internet is employed by Akimbo and TiVo, both of whom deploy broadband-enabled set-top boxes configured specifically to receive video signals over the Internet from their 'walled garden' of content.

The second option is - at least for today - much more complex and fraught with difficulties. Anyone who has tried to set up a video sharing network or actually transmit video across their home LAN can testify to the fact that these solutions are plagued by problems. However, this is the method of delivery that Apple has chosen to support with its soon-to-be-released iTV platform, a proprietary wireless adapter intended to share iTunes content (music, movies, and TV programming) with the primary home entertainment system.

At IBC, Amino (an IPTV STB vendor) announced the Aminet 125i, a new set-top box intended specifically to enable Internet video to be streamed directly to the TV. The company plans to sell the Aminet 125i to companies wanting to deliver their content directly to consumer's TVs without the hassle and expense of courting PayTV operators for space on their systems.

One obvious market that might want to take advantage of such a solution is the adult entertainment (AE) industry, a segment always interested in leveraging the latest technology to distribute their unique content (AE content purveyors are hard-wired to identify and exploit disruptive technologies). Imagine if Vivid Video were to give away set-top boxes that enable their Internet-based adult content to be delivered to the TV? No revenue sharing with satellite or cable operators and a direct connection to their consumer. Sounds compelling - at least to some consumers.

The appeal of this solution is by no means limited to the AE industry: there are plenty of other companies that should consider such a model. Imagine a mainstream retailer such as Wal-Mart or Target leveraging their brand and marketing muscle to introduce movie and music streaming services that delivered content directly to the living room. Imagine online movie distributors such as Movielink and CinemaNow using this model to reach the primary home TV. Talk about growing your addressable market!

Can the Promise of BB-TV be Realized?

With the arrival of solutions intended solely for the distribution of Internet-based content to the living room and the primary home TV, there is reason to believe that the challenge of connecting the Internet to the TV will be solved and in very short order. But this alone is not enough to attract the masses to broadband TV: there has to be something uniquely compelling about the service and content such that consumers (a) find it interesting enough to give it a try and (b) valuable enough to use it on a regular basis.

To understand what this 'special sauce' might be we need look no further than the Internet itself. The essence of the Internet - and what it does better than anything else - is connect people with unique but similar interests into virtual communities and turn them into identifiable, addressable markets. To see what I mean by this, checkout websites such as http://allnurses.com/ or http://www.americanbirding.org/.

To date, the economics of video delivery have precluded addressing such niche markets through traditional broadcast TV. The wide geographical scattering of niche markets and the high cost of broadcast bandwidth make it cost prohibitive. However, the economics of the Internet fundamentally changes this equation. Suddenly it's possible to use a single delivery mechanism - the Internet - to reach all the German-speaking population in America or all the quilters in the UK.

Aggregator, a new hybrid video operator in the UK, totally understands this power. When it launches services later this year, not only will their customers be able to watch 30+ broadcast channels of FreeView; they will also be able to get a wide variety of broadband channels. One of Aggregator's first on-demand channels will deliver Russian language programming which heretofore was only available, and marketable, in Russia . Suddenly, this is a must-have service for every Russian speaker in the UK!

With services like this appearing on TV screens around the world, there is now strong motivation for consumers of all kinds to consider Internet TV as an in-home video alternative to their regular TV services. And when you recall that each of us is a member of one niche or another, that strong motivation extends to us all.

Is it unreasonable to expect the mass of the viewing public to jump into Internet TV within 10 years? If you're a Russian speaker in the UK, it might be reasonable to be talking about one year, not ten. With a sharp eye on market demographics, services like Aggregator are poised to take the TV market by storm - one niche at a time!


--

About The Diffusion Group (TDG)

TDG is a research and consulting firm helping clients deliver better product and services through partner and research collaboration. Our clients benefit from years of industry experience and extensive global resources to help prepare for the upcoming challenges and opportunities within the new media and digital living markets.

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ENDS

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