IPTV, Next-Gen Television: The Box

By Mitch Berman, Guest Author

Previous Posts:

* IPTV: Next-Gen Television?
* IPTV, Next-Gen Television: The Operators

It’s the Chinese Wall, the troll under the bridge, the fallen tree blocking the road. It’s been the anathema of consumer-delivered payTV services around the world. It’s… the Set Top Box! We already have TV boxes from cable and satellite. We already have DVD players. And now we have DVRs for our TVs. Hey, let’s add one more! It will only cost you anywhere from $250 to $1000 and you get to pay a $20 – $70 monthly subscription fee for the mostly singular privilege of downloading the same movies you get today on cable on-demand or via IP downloading as part of your satellite service.

Been to a Best Buy or Fry’s lately? One can choose from a cornucopia of IP video-enabled boxes. Want a DVR from TiVO? How ’bout the new box from D-Link that delivers “… more than 200 channels of Internet video to the TV?” Or, what about the boxes from SlingMedia, Akimbo, AppleTV, Netgear, Buffalo, Microsoft and Vudu? Let’s not forget about the game boxes X-box and PlayStation, too. All use various forms of P2P, or downloading, or streaming to bring mostly “movies” to the TV set.

The leader in this cluttered field of broken dreams is the DVR. Here’s a statistic to consider. After 9 years and gobs of cash spent on branding since its initial consumer introduction into the market (whether by TiVo, or cable and satellite operators), leading analysts like Nielsen, eMarketer and IDC say that approximately 19% of U.S. TV households today even have one. Now, other PC-based, difficult to install, pricey and limited to mostly downloading movie boxes want us to believe that they have the magic bullet for driving consumer adoption?

Again, as in previous blogs, we intend to stay away from a “technology” discussion. Instead, we’ll take a brief look at the Business Model, Content and Consumer Experience behind these boxes. Although, it is important to note that many of these box companies are counting on the TV viewing audience in this country to have the tech-savvy for hooking up either their PC or a PC-like device to the TV. They do not and will not. The technology involved with most of these boxes make installation difficult for the common consumer. They are not plug ‘n play. Moreover, these technology companies know technology. They do NOT understand consumer behavior related to content consumption.

The business model is broken. Boxes and subscription cost too much and do not deliver substantive consumer value, as compared to cable and satellite offerings. Just ask TiVo and Akimbo. Both these companies have radically changed their business models in order to just survive. In fact, Akimbo finally got rid of selling Thomson set tops just a few months ago. Instead, they are trying to become a distributor of aggregated content to other boxes.

Consumer experience and content? TiVo probably delivers the best overall experience, as analysts confirm that TiVo subscribers are extremely satisfied. The DVR experience overall is good, no matter if you’re with TiVo, cable or satellite. Now, here comes Vudu with a $300 box that allows you to download the same movies you can get from Comcast or DirecTV.

You say, but Vudu has a TON of movies on-demand? The consumer hook, if you will, is not about “tonage.” Just ask HBO and Showtime. In the 1980’s, both services relied heavily on “tonage” for driving monthly subscriptions at $10. However, HBO hit a wall with its tonage strategy when consumers perceived a lack of value for filler movies around limited access to blockbusters. Thus, HBO formed a new strategy around “original programming,” which it employs to this day. HBO became the leader in developing and delivering “original content” like Sex And The City, The Sopranos, Band of Brothers, Big Love, Comic Relief and more. The history of consumer value is lost on Vudu, Akimbo, D-Link, AppleTV and Microsoft. A recently released BearStearns report said, “The problem with the ‘content is king’ axiom is that no one company has proven capable of consistently creating only great content, as evidenced by fluctuations in TV ratings, box office per film, etc.”

In fact, been in an Apple store lately? Try to find the AppleTV box. Dare you. Steve Jobs himself recently admitted to this endeavor being a failed experiment. Microsoft has a promotion targeting gamers to use the X-box to download movies for just $50 a month. Think they are? Microsoft announced last week that it will also release a new device they call “media extenders” (aka set top box) which link consumers from their PCs to their TVs, delivering “web content.” Anyone remember WebTV? The cheapest extender, from Cisco Systems’ Linksys division, is expected to retail at $300 and hit shelves by Christmas. Similarly, Apple’s “extender” (aka AppleTV) has been selling since March at $299. And they been flying out of stores… right? (sic).

Set top boxes are and will remain a barrier to consumer entry, as long as they cost money. Moreover, compelling content (beyond tonage) and consumer experience (e.g., TV QoS combined with search, personalization and targeted advertising) is the foundation for the promise of next generation television that these independent boxes do not deliver today.

In the next and final segment “IPTV: The Next-Gen Television?,” we will review another form of video over IP … the so-called “Internet TV” companies.

To be continued…

This segment is a part in the series : IPTV, Next-Gen Television