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Google TV off to a bad start

Google is undisputedly good at advertising and search. I’ve been convinced for a while now that Google & TV make sense, see this IPTV News interview from 18 months ago.

If Google had decided to enable a business model for companies from say Roku to NDS using its advertising capability linked to search, I’d be totally confident in the venture even though success might have still taken time to reach.

But by embracing the whole middleware environment with a complete solution, Google has bitten off too much to chew even for them. Large companies from Intel to Microsoft (including Apple) have all failed their initial entry into the TV market. Different reasons apply in each case; one commonality is the size and lack of agility of these companies that always want to fix the whole problem instead of concentrating on their strengths. In spite of still branding its products as betas, Google has now become such a behemoth that its legendary light-footedness has all but gone.

As Mike Elgan points out in his entertaining computerworld blog, the TV experience is mostly stuff you don’t want. The lean-forward Web experience is one of finding a needle you do want, in a haystack that you don’t. TV’s problem is more about sweeping out all the rubbish. This is where the traditional pay TV business fits in, although it is not clear whether this is cause or consequence.

Google may have some flashy (or should that read HTML5?) animations explaining what Google TV is. However, just reiterating that they’ll deliver the best of the Web and the TV together is not reason enough for this to happen.

So ...  what actually needs fixing for the Web and TV to Merge?

  • 1. reliability or stability of the set-top-boxes (or stuff inside the connected TV)
  • 2. ease of use of the user interface
  • 3. navigation within all the newly available content

Starting with the last item on this list, Google’s premise seems to be that they will be in a better position to resolve the difficult issue of content navigation. They do indeed have a unique selling point here with their search technology. But the other blocking point needs to be fixed first. I have 6 separate devices in my living room, all with the latest firmware; I can crash any of them, with sometimes just a few button presses. Android, the operating system that will power Google TV, is still pretty shaky, and that is a no go in my book. The lack of robustness of the demos at Google’s I/O event that amused many of the bloggers present, is telling in this respect.

Working up the list, despite its relative failure to date, Apple TV introduced the poster Art concept that all modern TV UI now mimic with variable success. Nobody has yet provided an adequate solution to navigating Web amounts of content from a lean-back TV viewing posture. Should Steve Jobs up the Apple TV status from its official “hobby project” to something more strategic, then whomever can fix this usability issue, second in my list, Apple can.

As for the first blocking point, Google delivered Android for the Smartphone at breakneck speed. But in so doing, confused the market with a multiplicity of unstable versions. This is almost the opposite of MacOS on the iPhone.  Apple’s closed approach furthermore ensures both a seamless user experience and a certain level of quality. Google’s open approach can open up a Pandora’s box of faulty or incompatible apps. For robustness in the TV space one would more naturally look to the NDS’s or the OpenTV’s of the world to fix this issue.

If I were Eric Schmidt, I’d put Android for TV back into the R&D labs for another couple of years. Then choose a partner, or to be more true to their philosophy, publish open API’s for anyone to monetise OTT content through an ad system designed for hybrid TV. Going for gold during a rush, the way Google is now doing is risky business and they may well fail. If they just sold the shovels, Google would be sure to succeed and they could always buy back into the whole TV experience when the dust settles.

Combining the Web with TV, which is the Google TV bottom line, has been tried more times than any industry expert can count.

If it finally succeeds because big HD screens let you read text in the living room and devices let you interact with cloud based services, maybe with voice control or gesture based interfaces, then surely it’s the set makers that stand to win. I don’t see how current the Google-Sony-Logitec alliance could withstand the strains of success.

If the glue that finally sticks the Web and TV together turns out to be a reshaped entertainment and media ecosystems, with OTT becoming the norm and content flowing directly to TV’s through bit-pipes, then we would see a fragmentation of the content industry. Google could then dominate this space just like it does the Internet - thanks to its search/advertising model. However, the advent of file sharing and the MP3 saga have woken the sleepy content industry.  I don’t believe they will let Google reach such prominence here. Even if I’m wrong and they do, what revenues does Google derive from MP3 file sharing, legal or otherwise?

Quality live TV & film are still associated with subscription services. During the advent of the Internet over the last decade, the Pay TV industry has only gotten stronger with rising numbers of subscribers. TiVO tried to innovate a new model but has seen its active subscriber base drop from 3.3m to 2.5m in the last 18 months.

An executive from the TV industry once told me that young enthusiastic techies like myself had been explaining to him how new technology would radically change the TV business for over ten years. This conversation took place over five years ago! His point was, and I suppose still is, that for fifteen years, waves of technical change have only reinforced the basic pay TV model. The still topical world recession hasn’t dented their subscriber numbers.

Let me revisit the content navigation issue once more. Beyond the sheer mass of available content where Google’s search will solve problems, the problem is also going to be about home networks. There’s no point having a great search engine if it cannot index the content on all the different devices in the home. Google is no better equipped than others to achieve seamless home networking. In fact, some like the proponents of the DLNA standard are probably better equipped for this.

I’ll end with lack of clarity from Google TV’s positioning.

Google champions the search paradigm where revenue is generated from advertising. With it’s Android operating system, Google is moving also into the iTunes/Appstore model where revenue is generated from the sale of apps. It’s not clear to me how Google will be able to play both hands simultaneously on the TV.

A blog entry by Vintner: If Google TV were a bicycle, I'm a fish also points to the lack of clarity. This fun read states that Google is no longer a start-up and that pushing technology is no longer enough, even if it’s cool technology.

Indeed, there’s already too much technology in the crowded TV space. What the industry desperately needs are viable business models to enable OTT content flows to complement - rather than replace  - existing pay TV platforms. So Google, please put your TV technology back in the R&D lab where it belongs and bring us the tools to find & monetise video from the web on the TV.

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Back from my first Anga

My feelings from the Anga cable congress can be summed up by my reaction to Cologne’s main landmark.

A surrealist sight hits the visitor exiting the main Cologne train station. The gargantuan cathedral called the ‘Dome’ seems to rear up from the past; which is how I perceive the cable industry that Anga represents. The Dome is surrounded by modern, more ugly buildings, that seem to be slowly encroaching upon it’s lebensraum just like the Internet or DTT threaten Cable. The train station itself, with its underground lines, represents different hybrid ways of transporting things; I wonder if it’s undermining or on the contrary underpinning the great old cathedral’s foundations. From the outside it’s as if the majestic building, symbol of the cable industry, were dying. It’s blackened at places and has almost permanent scaffolding that seems to hold it up.

A different story emerges when you are inside. One’s jaw drops with the shear size. Wikipedia just told me that it was once the tallest building in the world. The vertical proportions of the arches stretch upwards as if some divine hand had pulled malleable stone upwards. Then you look closer and realise that no, this is the work of hundreds of humble stonecutters over centuries. All the carefully crafted slabs stack up in powerful columns, just like the innumerable insignificant single-valley cable plants, in nearby Switzerland, add up to a powerful force. The strength of this force will keep enemies at bay for the foreseeable future.

OK I'll leave the poetry there; now for some reporting:

A first surprise on my first visit to Anga is that it's marketed as a cable event when IPTV, FTTx, Satellite, hybrid and more abound. OK so there are a bunch of booths with nothing more than little bits of cable on display, but no-one ever stops on those anyway and one sees one or two even at IPTV World forum. The organisers must be doing something right though because at least one company I met, Zappware, were on the waiting list and didn’t get a booth.

Wondering around for two days wasn’t enough for my sense of direction to kick in so I kept on getting lost in the huge hall's two sections. There were an order of magnitude less booths than say at IBC, but almost all of them were mid sized. I used the Korea “Green IT” pavilion at one end as a landmark. It was a mistake because each time I passed it I felt a little worse about how clueless-marketers are trying to jump on the green bandwagon and have all but broken it before it has even left the station. The only green thing in that pavilion was the word.

On the positive side, the TivO demo on the Conax booth rocked. It was by far the most convincing illustration an industry oxymoron: walled garden OTT, where operators give access to all the content that is readily available out there, while reassuringly (?) never letting the subscriber out of their sight. The business models and content deals are not yet clear as earlier failures from the likes of Joost show, but the end-user proposition is now overwhelmingly compelling. It’s beautiful. I want it now in my home now!

The OpenTV 3D demo was the first, modest but effective, effort of using 3D in the interface itself, not just the video, which I’ve seen. 3D will not be revolutionizing mainstream interfaces soon, but I definitely got the feeling of peeking into the future.

I saw three interesting companies from my hobbyhorse Quality of Experience area. Ineoquest where present with a big booth clearly hoping to push their IP and head end leadership further into the cable market. Skyline’s Dataminer product was on prominent display. It’s an interesting way to commoditize the likes of Ineoquest by putting the effort on a central piece of software, which other quality systems then report to. Another outsider in the Quality area was the German supplier Axiros. From a background of managing zillions of legacy boxes, their approach is now built on the TR69 protocol. Axiros offer a new product that sits between the device management systems (ACS) and the devices themselves (STBs) so that more meaningful info can be taken from each device. Axiros performs some of the QoE monitoring functions themselves this way.

I got a private demo from German STB maker Winbox. They had a really simple “why-didn’t-I-think-of-that” ideas and an effective demo for simple « push » playlist. A VoD server pushes short content like trailers to device’s local storage (HD or Flash memory) so a personalised preview or barker channel is available. If not a killer app, this could at least be a killer VoD-ARPU generator...

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STBs: from CAPEX to Cash-in

Un TV Connectée powered by Awox
A connected TV powered by Awox

For the last six years, I've been going around trade shows hearing and saying that the big bad wolf in IPTV economics is the STB, which typically represents up to 70% of total capital expenditure, or CAPEX in Telco-speak.

As OTT and social media are accelerating the arrival of a new technical and business environment, my premise is that the huge threat is becoming just as big an opportunity. This year's IPTV World Forum gave me more food for thought when I spoke to Awox, which has a foot in the operator set-top box market and also a smaller one in off-the-shelf devices.

The problem

Let me go back first to the initial problem I've had to surmount several times from within operator deployments.

Typically we are talking about a total cost of ownership for a single set-top box (packaged with remote cables and CAS, delivered, installed and maintained) of, say, 150€. If we have a million subscribers the math is simple. We need a spare 10% of boxes for repairs and to ship to new subscribers so the capital required would be 165M€, all for one happy operator to pay for.

All major Telco deployments have had to cross this difficult chasm. To make things worse, IP based boxes were initially very much more expensive than satellite or cable ones. In finance terms, a way of easing the pain is to remember that contrary to head-ends, STBs are a marginal cost, which means you only pay for boxes as you deploy them to customers who hopefully are, in turn, paying for a service.

Why did all of the early operators and many coming to market today want to do something so financially bizarre as own the STB?

The first reasons were security and control.

From the outset, operators needed to obey stringent security rules set out by rights holders to be given access to their content. Before considering interactive services, an operator must at least deliver plain vanilla pay-TV. For that they must have access to the premium content that people want to watch. Therefore they must adhere to the strictest security constraints imposed by content owners. A few years ago it seemed only natural that to get into such a business, one could only play by the rules. So like cable and satellite operators, who have always owned the STB and the smartcard therein, early IPTV operators did the same and most are still doing so.

But ten years on from the launch of the first IPTV commercial trials, a consensus is appearing (there is a good Farncombe white paper on this subject here). Operators only need to own a smartcard for broadcast networks that do not have an inherent return path like satellite or digital terrestrial. For IP networks, where each STB can establish an individual link with a security server, software-based security is sufficient. A smartcard is no longer required and thus, this first reason is vanishing.

Telco’s and especially incumbents have long had a phobia about letting anything that they don’t control onto their networks. They usually have a team of security gurus who have to give a blessing before any new device can be deployed. Looking back a few decades, PTT's have always jealously guarded their PSTN networks from non-vetted devices, even plain vanilla telephones. As a teenager in the early eighties in Europe (Paris & London), I remember the thrill of plugging an illegally 'smuggled' phone from the USA. The phone was made of transparent plastic with coloured LEDs. What a thrill when at the time BT, DT or FT only supplied cream or brown handsets. In the deregulated 2010 landscape, all operators have so little control over the last mile of their networks that it seems silly to pretend that owning the STB still makes a difference, and even incumbents that own the last mile are lost when it comes to managing the home network.

Awox has experienced this gradual change first hand. They got through France Telecom’s red tape with their Internet Live-radio devices currently available to Orange subscribers in France.

Service operators have always worried about stickiness. In today's Internet world, where the competition is only a mouse-click away, it’s no surprise to Awox that many Telcos have gone for a “walled garden" approach. Indeed Awox have been through those trials and tribulations with Orange already, helping the operator offer OTT services from within their walled garden. But operators still pertain that owning the STB is part of the secret to owning the subscriber, or at least locking him or her in.

Until recently, the lack of standards has meant that operators have had to develop a new portal for most new devices. This has provided yet another argument for those proponents of a tightly controlled device policy, which again ends up meaning that operators want to own the STB.

In the early days decision-makers considered that technology was the hard nut to crack. Getting digital video through IP networks and keeping the service up and running turned out indeed to be really hard. But technological difficulties were overcome in the end and the make-or-break issue for IPTV turned out to be content and features. It's been a while since anyone has risked the tired old "content is king" slogan, but it was dominant for a long time. If that 165M€ could have been spent on content rather than STBs there might well be even more competition from IPTV operators today.

Let's leave the past there. What has changed so that 2010 might be different?

Costs can come down:

As a device vendor Awox sees itself helping move the STB away from its current CAPEX-devouring Achilles heel position, in particular through the use of standards.

Throughout the whole tech industry, standards have been the best way to lower costs. Linux Vs Windows is such an example. Awox is one of the IPTV ecosystem's DLNA champions. Olivier Carmona, the CMO, pointed out that this is particularly true for advanced home networking, for example. You can commoditize many components so that in a fully DLNA home network, for example, a low-end hard disk simply plugged into an STB becomes a ridiculously cheap NAS. Looking further down the road, Awox have contributed DTCP/IP SYNC & DTCP/IP SOURCE to the spec so that DLNA systems will be able to distribute premium content within the home. It's no longer science fiction for that same 30€ hard disk to enable PVR functionality from a DLNA enabled Pay TV service. This is yet another initiative that goes against traditional STB middleware vendors.

Other reasons:

  • Content owners were badly bruised from the MP3 music phenomenon - I almost wrote debacle there. However, the story is still unfolding and some musicians are living well. Musicians, like the big film studios, have now acknowledged that they must innovate. They will already agree to release content into new distribution channels and even consider entirely new business models.
  • Users have got used to the Internet as a source of content, even if they don't yet get premium TV from that source. They expect ready access to what is considered as free, like YouTube.
  • New initiatives to deliver premium content are still searching for their business models. Some, like Hulu, are bound to find some kind of stability in 2010. In the same vein, many TV stations are eager for a chance to reach out directly to the world's hundreds of millions of broadband subscribers.
  • In this area, the never-ending success of Apple has shown that people, beyond early adopters, will pay if the product, including digital content, is truly desirable.
  • Until now, TV-based widgets have been a gimmick. Indeed, if you want stock quotes in your living room you will either use your laptop, smart-phone or some tablet. But finally, demos at the 2009 IBC (more at CES, then NAB this year) are showing some really useful widgets. The secret ingredient seems to be the interactions with content itself, which NDS's Oona concept illustrates well.
  • Early adopters have shown that they are prepared to pay for a physical device - as long as it is desirable. Take-up of expensive devices like the Sling-box is good evidence. Some pundits predict the latest Tivo box will reinvent TV yet again in 2010.
  • The advent of home networks has led users to expect some control over what goes into their sitting rooms. DLNA championed by Awox will accelerate this further. Empowering users with a wider and constantly renewed choice of devices makes them happy. The marketing message is that the pain of paying is replaced by the power of choice.
  • Operators are scrambling to deliver sexy new 2.0 features. Big companies are rarely successful at this kind of catch-up game. I eagerly await some real figures from Verizon's much-touted Fios Twitter and Facebook implementations to see if we have reached a turning point (I heard at IPTV World Forum in March that only 10% of the user base knew about the social media features).

There are two ways of looking at the OTT box market. Some are saying that the huge variety of devices, ranging from FetchTV to Myka or Roku through Apple TV, have not yet made a huge impact. I think the glass is half full: there is such a strong a vibrant offer out there, as well as a real demand, I have no doubt that it's just a question of time - in quarters, not years - before one meets the other and we see one of the OTT services turn their huge mind-share into an equivalent market-share and then ARPU. TiVo has already shown what success can look like, albeit at a modest scale. If a box were to be operator endorsed, that could only help and the TiVo reincarnation in the UK market with Virgin backing could create a de facto standard.

Google's entry into the TV space is only a question of time. Apple, too, will eventually get it right and both giants will get a slice of the sitting room pie. Again the only sensible way forward for operators is openness, as Martin Peronnet, CEO of Monaco Telecom, pointed out during IPTV World Forum. He pointed to the way the iPhone's Appstore has diverted ARPU from operators and said, "never again".

With their internal processes, operators are never quick enough to get the time-to-market right on their own. Many big operators are publishing specifications of network API's. This is, for example, the case with the Orange Telco 2.0 initiative described by Stephan Hadinger during the last World Broadband Forum. The end game is for end users to always have the best of breed, sexiest new devices that they want enough to pay for. A lightweight certification process could guarantee that basic services all work. Any new over-the-top services would be the vendor's responsibility.

Getting rid of a huge financial burden is rewarding enough. But that 165M€ of cost discussed already could become extra revenue instead. Indeed, why would you want a better, newer device if you were not going to use it more often? Even if much of the content revenue goes to over-the-top suppliers, those extra hours will always enable some marginal revenue opportunities. Nothing stops operators jumping on to any success story as it emerges and delivering their own service, either OTT or in a walled garden. OTT services are bound to flow through different parts of the home network, where Awox' staunch DLNA support makes all the more sense.

In the model of my premise, if some technology turns out to be a dead-end, that would be the subscriber's issue. Leading-edge technology customers expect this to happen from time to time. No one sued their vendor over Betamax or HD-DVDs after all.

Sleek new devices are coming to market anyway. Operators must become better at encouraging their customers to use devices over which they still have some influence because they will not retain control for much longer.

Olivier Carmona commented that "Operators don't want the living room and it's content related revenues hijacked by an OTT supplier. Getting the sleekest, newest devices available into subscriber's sitting rooms seems a good proactive strategy". Beyond the technology, that I agree is cool, the true innovation is in the new relationship operators can have with their subscribers.

The whole industry claims the ability to link broadcast content with the interactive experience from the web. With an open standards DLNA approach, Awox believes that it is important to make only the link that best suits the user, the moment, the content and the available hardware.

Operators should consider launching new devices or peripherals to existing devices, that customers go out and buy in the stores; after all it will take them at least two years to make a decision ;o)

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Churn: the only real reason operators embark on monitoring projects

In the best of all possible worlds, OPEX control should be motivation enough to set-up a complete quality monitoring solution around an IPTV project.

In the projects I have seen, this is the case, but OPEX control alone leads only to skin-deep monitoring without affecting core customer-care processes.

Competition from other service operators and the ensuing churn is the call to action deep enough to review core processes.

To fix the quality issue you need the technical teams to work with customer support and marketing teams.

As I posted recently (here), a changing content landscape with new stakeholders will vastly increase the needs for monitoring. So in the end monitoring is indeed a blue ocean market, but one that needs customers operating in blood-red seas.

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IPTV World Forum reports on Videonet

IPTV World Forum blogs are on videonet.

Overall there was a great attendance, with lots of people coming to Olympia to do business. The booths were decent although I didn't spot many exciting innovations this year and as usual the conference was of varying quality, from gems to blatant sales pitches.

The 2010 conference taught me that Canvas is a purely British thing for now, and a few companies companies stood out for me:

  • Netgem for their ability to do fancy stuff with run-of-the-mill chipsets,
  • Echostar for finally winning a deserved award for Sling-loaded
  • BeeSmart for their interesting freebee initiative,
  • Intel for getting Sodaville up and running, most impressive with Amino.

But overall it was a good show on my subjective scale.

Day 1 blog post is here

Day 2 blog post is here

Day 3 blog post is here.

Also some in depth analysis of some of the issues I became aware of at the show to follow.