IDTV

Ovum view on AOL video portal

Useful discussion on AOL's video portal

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AOL jumps on the broadband video bandwagon

AOL has announced plans to introduce an ambitious new video portal that aspires to become the leading web destination for online videos.

Josette Bonte, VP of Content and IPTV, comments on the effect of this in North America:

"We think that AOL video comes at a time when AOL is in much need of reinventing itself from a me-too Internet access to a glamorous service open-access broadband content company, but the service may be too ambitious to get traction across all the demographics that it aspires to serve."

"If it executes on its plan as stated in the announcement, then AOLvideo will become the richest video destination on the Web. The content should find enthusiasts among a variety of demographic segments, with its wide range of mainstream and niche content. By allowing users to post their own personal video content on the Web, AOL is also trying to capitalise on the craze that has young users flocking to sites like YouTube.com and MySpace in droves."

"The only real caveat may become one of true identity: by trying to appeal to such broad demographics, AOL may in fact have trouble formulating its market-entry awareness strategy and leave a lot of users eager to return to their speciality sites."

Should you wish to contact Josette regarding this news or to speak to an analyst regarding how this will work in Europe please don't hesitate to contact us at prteam@ovum.com

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See full commentary below:

AOL jumps on the broadband video bandwagon

First out the gate came Google, then Yahoo! and now AOL: the battle for broadband video programming is heating up. On 1 August 2006, AOL announced that it plans to introduce an ambitious new video portal that aspires to become the leading web destination for online videos. The service, accessible at www.aolvideo.com in Beta test mode later this week, will let users watch videos on demand from a great variety of content providers, search the Web for clips on particular subjects and upload their own personal content to the site. We think that AOL video comes at a time when AOL is in much need of reinventing itself from a me-too Internet access to a glamorous service open-access broadband content company, but the service may be too ambitious to get traction across all the demographics that it aspires to serve.

Ovum view

We find AOL' s new broadband video service impressive because of the large inventory of content that it plans to show from a variety of popular brands. If it executes on its plan as stated in the announcement, then AOLvideo will become the richest video destination on the Web. The content should find enthusiasts among a variety of demographic segments, with its wide range of mainstream and niche content. That strategy may be dictated by its need to attract a larger number of tier one advertisers to support the site. In spite of protestations to the contrary, Madison Avenue is still looking to duplicate on the Web the mass appeal it still enjoys on TV. By allowing users to post their own personal video content on the Web, AOL is also trying to capitalise on the craze that has young users flocking to sites like YouTube.com and MySpace in droves. The only real caveat may become one of true identity: by trying to appeal to such broad demographics, AOL may in fact have trouble formulating its market-entry awareness strategy and leave a lot of users eager to return to their speciality sites.

The background

AOL had been losing a lot of customers to 'plain wrap' broadband ISPs over the past two years. With the value of its stock in a steady decline, the company is very much in need of re-engineering. Since its inception, AOL has been deriving the bulk of its revenues from subscriptions, but that has been slowly changing in favour of more contemporary business models such as advertiser-support. By launching a new video portal, AOL is also trying to capitalise on the resources and clout of its parent company, Warner Bros. Earlier this year, AOL staged a 'dress rehearsal' for the new aolvideo.com, by launching In2TV, an advertiser-supported broadband TV service deployed in concert with Warner Bros TV. This move enabled AOL to test its new 'Hi-Q' video technology that claims to deliver broadband video with DVD quality. Additionally, AOL had quietly acquired two companies specialising in video search: Singingfish in 2003 and Truveo in December 2005. On the business development front, AOL also signed ground breaking deals with large advertisers such as Hershey, Intel, Kia and Kraft Foods earlier this year, thus paving the way for its current transformation; it also acquired Lightningcast, a technology company specialising in broadband advertising.

The AOL video service

Ovum has learned that the new AOL TV portal will comprise three principal offerings. The first will be 45 cable-like video on-demand channels programmed by AOL's affiliated content partners: A&E Television Networks, including The Biography Channel and The History Channel; Comedy Time; Endemol USA; Expo TV; Lime; MTV Networks, including MTV, MTV2, The N, Nick at Nite, Nickelodeon, Comedy Central, Spike TV, TV Land and VH1; National Lampoon; Procter & Gamble Productions; Sopresa; TNT and Warner Bros Entertainment. In addition, AOL has also made deals with video on-demand aggregators, TotalVideo and Wild America and with the WNBA, for the retransmission of their archived games. The channels will feature some advertiser-supported content that can be streamed to users for free, whereas 'downloads to own' of individual shows will be available on-demand for a fee. The downloaded videos will be viewable on other portable devices, such as mobile phones, that support Microsoft's MSFT.O copy protection system.

The second feature will be a powerful video search engine that will direct users toward the video content they are looking for, even if that content is located outside of the AOL domain.

Finally, the portal will boast a service called 'UnCut Video' where users will be encouraged to upload their own personal videos and photos directly from their own video camcorders or digital cameras, their PC or their video-enabled phones.

Marketing Opportunities Emerge in Online Gaming Venues

Link: Marketing Opportunities Emerge in Online Gaming Venues.

New research about the marketing opportunities in massively multiplayer online games (MMOGs), such as Second Life.

The Digital Home: 10 years off

"The 'Digital Home' is 10 Years Away"

Nice opinion piece with some useful stats. The main thrust is that it depends how you define 'digital home'.

Launch of Sky Broadband

Link: BSkyB - Investor Relations - Press Releases.

Gives basic details of Sky's broadband plans.

New IPTV aggregator gets VC fuinding

Link: informitv - Aggregator collects venture capital for broadband service.

London-based broadband television start-up Aggregator has accumulated £9 million of further funding in equal investments from 3i, Amadeus and Intel for its forthcoming niche network video operation.

Aggregator was founded in May 2005 with seed investment from Amadeus Capital Partners. The further funding round will be used to support the rollout of broadband video services over the next two years.

The company plans

Ofcom reveals DAB plans

Link: Ofcom Website | The Future Licensing of DAB Digital Radio.

Latest announcement by Ofcom describing how it will expand the DAB network in the UK.

Freeview is a failure

Freeview is a failure. There, I’ve said it.

Not a particularly popular point of view, perhaps, but one occasioned by a recent examination of what’s been going on in Italy’s digital-terrestrial television (DTT) environment.

For a variety of reasons, since 2003 the Italian government has chosen to subsidise DTT receivers containing a Java-based interactive TV technology called MHP (for Multimedia Home Platform). This is an open-standard system officially encouraged by the European Commission, and until Murdoch’s Sky Italia platform complained about it, Brussels was happy to allow the subsidy - because the declared aim was to offer e-government services over the DTT platform.

The plan appears to be paying off. In the Lombardy region, if you want to know if you’re entitled to free dental care, you can insert your ‘citizen card’ – an ID card carrying a computer chip – into  your digital-terrestrial television (DTT) set-top box, link into the local health services database, and get the answer in a few seconds.

At the moment, only triallists in possession of a special code can access the service, but it should go live later this year. Meanwhile, numerous Italian government information services can already be dialled up on MHP-capable DTT boxes, just by pressing the red button on the remote control.

Why does that make Freeview a failure? One reason is that nothing like the Italian system looks as if it will ever be available on the UK platform.

When the BBC and others specified the Freeview receiver spec, they left out just about every possible interface they could in order to keep the price down. In the vast majority of Freeview boxes, there’s not only no integrated modem, but nowhere to plug one in. That means no interactive advertising.

There’s also no smartcard slot. With TV watchdog Ofcom deciding just a few weeks ago that it is now permissible to offer pay-TV services on Freeview frequencies, that decision is looking decidedly foolish, since no smartcard slot means no pay-TV. 

To sum up, the Freeview platform can’t be upgraded – and there are already 10 million-plus Freeview receivers out there.

Left to its own devices, the specification might have evolved, but the BBC’s insistence on promoting only cheap Freeview adapters in its digital TV promotions has maintained a downward price pressure on the sector and encouraged the public to see Freeview as a £40 impulse-buy.

This means manufacturers have no incentive to add new interfaces to Freeview boxes (because that increases the price), or invest in Freeview-capable PVRs (because consumers don’t associate Freeview with a £100-200 price-point).

Finally, the ‘cheap adapter’ strategy has discouraged sales of digital TV sets (iDTVs), because it means the BBC does not tell viewers that they can get Freeview by simply specifying an iDTV when they come to upgrade their TV set.

All of this represents a big problem for Digital UK, which launched its analogue switchoff campaign last week. For a start, although 70% of UK homes have digital TV, 62% of the TV sets have yet to be converted, since the UK has high multiple TV ownership.

As a result, according to recent research, only 35% of UK homes will have converted all their TV sets to digital by 2012

Meanwhile, almost every one of the UK’s TV homes has at least one VCR, which will also have to be converted to digital by 2012 unless it’s to stop recording. Current government thinking is that buying a cheap adapter for a VCR just won’t work, because the set-up process is too complicated. That means swapping out a VCR for a PVR.

But penetration of Freeview PVRs is currently negligible, as pointed out above, largely as a result of the BBC’s digital TV promotion policy. So to 40 million or so TV sets requiring conversion, add another 25 million or so VCRs. 

Meanwhile, the UK is saddled with a non-future-proof DTT platform which can’t generate new revenue streams, and won’t allow poorer families without a PC to access e-government services.

Which is to say that it all looks like pretty much of a failure to me.

Are TV ads an aberration?

Most advertising doesn’t interrupt your attention. Think of what you do when you read a magazine, for instance. You either read the editorial, or flip through the pages looking for something that interests you. If you happen to spot an interesting ad on the way, you stop and look at it. But the ad doesn’t interrupt you without your consent.

Same with a poster. You’re walking along the street, or driving through it, and the billboards just pass you by – again, you only focus on them if there is some image or word on them that triggers your attention. But even when they’ve caught your attention, you’re free to move your focus elsewhere.

The key in both cases is that you can actually continue doing something else (reading, walking or driving) if you want to – rather than look at the ad, that is.

Pop-up ads on the Internet might appear to be a counter-example to this. But while they are doubtless irritating, you can (or should) always be able to close them with a single click – the equivalent of just walking on. And advertisers are realizing they’re decreasingly effective, anyway, precisely because of their irritation factor.

Radio advertising might, perhaps, appear to undermine the case I’m making. I’m listening to a newscast or a music track, and up comes the ad. There’s nothing I can do about it. But listening to the radio is, typically, something that doesn’t take up 100% of someone’s attention. Listeners can be doing pretty much anything else, in fact, and generally do: they listen while working, driving, cooking, cleaning, reading the paper - even making love. Very few people, I would guess, actually turn the radio on, sit down in a chair next to it, and just listen without doing anything else. So a radio ad really isn’t that interruptive.

That’s what different about TV. Traditionally, it has been a very focussed, engaging activity – as anyone knows who’s been shushed when a family is viewing a favourite soap together. The only thing most people can do when an ad comes on, and they don’t want to watch it, is get up and go out of the room. Otherwise, you’re forced to put up with the interruption.

The extent to which TV hijacks our attention during commercials is illustrated by the large amount of ad-skipping that goes on in households equipped with the technology to do it - such as personal video recorders (PVRs) or a ‘video-on-demand’ (VOD) enabled set-top box. The fact is, television is such a compelling experience that no-one likes it being interrupted. A PVR simply allows you to do with the TV what you’ve always done with magazines, which is to flick through what doesn’t interest you.

On this basis, you could look upon the new, ‘on-demand’ paradigm of television viewing as evidence of the advertising world simply returning to its proper role – if you like, as servant rather than master.

Interestingly, all of the evidence about teenage viewing habits is that teens – unlike their elders – don’t watch television in the same focused way. A typical teen will be chatting on MSN, listening to their iPod, and texting on their mobile – often all three together – when the TV’s under their ostensible control. As they mature, that mode of viewing will become the norm. Television won’t even be able to interrupt if it tries, being treated rather as radio is today.

The medium will, meanwhile, find other ways to fund itself. We may be prepared to sell our personal profiles in exchange for receiving only those ads that are personally targeted at us – or pay (as people already do with subscription VOD services) to watch TV without any ads at all. Either way, the classic, undifferentiated, 30-second interruptive spot is, in the long run, as dead as a dodo. It’s a wonder people ever accepted them in the first place!

IPTV may have a scalability issue

A company that supplies technology to the IPTV industry held a press event the other day, and spent quite a lot of time dissing Microsoft TV. Their main accusation was that Microsoft’s IPTV software solution wasn’t scalable, and they predicted that none of the so-called Tier 1 telcos that had adopted the Gates technology would have more than 20,000 subs by next year (i.e. 2007).

Actually, their criticism wasn’t confined to Microsoft. “Scalability of IPTV has been the biggest bugbear of IPTV,” said the company’s CEO, admitting that his main problem hadn’t been gaining market share for his particular product, but that the market had ended up being much smaller than predicted.

It’s interesting that, in the weeks that followed, two Belgian telcos, Belgacom and Telenet, announced the results of their respective digital TV deployments, and with vastly different results. Belgacom’s much-hyped launch last July had garnered just 33,000 subs by year-end 2005, while rival Flemish cable company Telenet, launching several months later, and to a smaller constituency, had notched up well over 100,000 (the precise results are due to be revealed today (Tuesday 28^th Feb)).

So what’s the difference? One can surely not dismiss the possibility that Telenet’s content offering was simply more attractive to potential subscribers. But (a) Belgacom managed to out-bid it last year for exclusive access to Belgian premier league football matches and (b) Belgacom carries exactly the same services from Flemish pubcaster VRT that Telenet does. So, at least on the face of it, Belgacom’s content should match Telenet’s in attractiveness.

There is a significant technical difference between the two services, however. Belgacom’s was a proprietary IPTV offering (not Microsoft’s, as it happens, but Siemens’) over an ADSL network. Whereas Telenet’s was an old-fashioned DVB-style deployment over a digital cable network, using an only slightly less mature middleware solution, the Java-based MHP.

Given the relative circumstances of the two competitors, it’s rather tempting to suppose that the difference is in fact due to Belgacom encountering problems trying to scale up its IPTV network. Maybe that's a cue for all of us to start scaling down our IPTV forecasts.

'Telly-phones' - killer app or not?

Here's a bold statement: "Watching television on your mobile is a stupid idea. Nobody will do it for any length of time at any sustained cost." (From Monday's Guardian - Emily Bell again: sorry, Emily, nothing personal....)

Compare and contrast with the following observations:

1) "We expect Western Europe to ramp up to over one million [TV-capable cellphone] units sold this year." (From my websit'es report on Strategy Analytics' latest research, which predicts global sales of such devices this year will reach eight million).

2) South Korean telco SK Telecom's broadcast TV to cellphone service currently has around 400,000 subscribers, paying €11/month each. (Korea Times)

3) All commercial trials of mobile TV in Europe which have so far published results have shown that subscribers are willing to pay €10-15 a month to watch TV on their mobiles, and that in practice they do so for between 20 and 25 minutes a day. (See http://www.dvb-h-online.org/services.htm, and be prepared to do a lot of digging!).

I'm not saying that means the issue is conclusively settled. For instance, a significant amount of TV viewing to mobiles takes place in the home, a usage segment likely to be taken over by pay-TV operators once they get their networked home entertainment technology in place. Moreover, the revenues quoted may not be sufficient to make a business case.

But surely, on the evidence, no-one can argue there isn't some demand for these services, if only from bored commuters on long commutes, and that they'll be prepared to pay something for it on an ongoing basis.