Advanced Media Report

The big themes: lots of ways for TVs to play Internet video, ever-bigger flat screens (mostly LCDs), AV home networking, mobile TV …

Sprint Nextel really is building out its WiMAX network. (They said they would, but Sprint has said similar things before about big-bandwidth wireless networking.) They let slip at CES that earnings would suffer this year from the capex, and its stock quickly tumbled.

Verizon Wireless and Qualcomm announced that the telecom would introduce MediaFLO service this year.Content is to come from NBC, CBS, Fox, MTV and others.

Samsung demonstrated the competing A-VSB mobile TV system with the help of co-developers, and promised “fair” licensing terms.

Dolby demonstrated Dolby Volume, attempts to get it adopted by TV-set makers perhaps in combo with similar firmware offered by Cirrus Logic.

Warner Bros. and LG Electronics intro dual Blu-ray/HD-DVD player.But costs are far higher than for either technology alone.Still, there’s hope for inexpensive dual-format devices soon: STMicro introduced a 2-stream HD decoder chip that works with both formats.It should take about a year for this to be embedded in a consumer device.

LG Electronics also showed a 3D monitor, probably most useful for place-based advertising/promotions.

Apple’s iPhone and Apple TV finally were introduced, as the whole world knows. The iPhone will not be available until 2H’07 and only work with AT&T (Cingular) network in the U.S.Apple also announced that Paramount Pictures’ back library is now available on iTunes.

Meanwhile, Motorola introduced the MotoRizr Z6, which does much of what the iPhone does (though with traditional buttons, not a touch screen); it’s a Windows Media music player, syncing with WM on a PC; Yahoo! is supplying a browser for it.Motorola also showed a prototype bicycle charger for cell phones.

Sharp showed the world’s biggest LCD, at 108”.More important, many vendors showed LCDs with 120, rather than 60 frame digital refresh, largely eliminating typical LCD image lag.

Slingbox introduced Slingcatcher, an inexpensive box (they aim to license it to fit within other devices) allowing TV sets to receive and cache video sent via 802.11. Other showing PC-TV connections included Motorola, Dell, Sony, Microsoft, Toshiba, Samsung, and Sharp.

Netgear and BitTorrent partnered on a similar box meant to bring file-share-network video, in particular, to the TV.

Microsoft showed a new home server, and, of course Windows Vista and Xbox360.The latter has now topped 10M units in sales and is being repositioned as an IPTV settop as well as gaming box. Media Center PC adds new channels from Nickelodeon, Fox Sports, Starz and Showtime. The SportsLounge from Fox will allow people to watch a game while simultaneously getting scores and video from other games. Showtime's channel will offer hundreds of hours of programming and allow non-subscribers to purchase individual episodes of some Showtime programs.

Sony discussed its PlayStation movie download service, and also said it has met its 1M target for U.S. PS3 unit sales (though that seems to be at most 75% of its original aim and was reached by diverting units meant for Japan).

SanDisk and Haier showed competing WiFi-connected AV/Web player/storage devices that need no PC.Haier’s runs America Online software/programming.

Walt Disney Co. intro’d new Disney.com web site including video file sharing, TV downloads, massively multiplayer games.

AT&T said that Homezone users will soon be able to manage viewing choices from their cell phones.U-Verse service will now deliver New England Sports Net and YES.

Modeo announced that it is Beta testing its service in New York City, with result to decide “if we go forward.”

Netflix, which began with a business plan to offer downloads but has instead built its business on DVDs, now plans to offer streaming movies to its current DVD subscribers. “Watch Now” service will not offer downloads, not allow viewing on any device other than initial streaming client, streaming only in real-time. Features offered are from NBC Universal, Sony Pictures, MGM, 20th Century Fox, Paramount Pictures, Warner Bros., Lion’s Gate and New Line Cinema.

Service is to be free to subs, at least as a market test: from 6 to 48 hours/month, depending on sub plan.For the most common $18 monthly plan, subs will also get 18 free streaming hours. Offering roll-out is to be phased in over 6 months, to 250,000 more subs/week. Netflix says it has budgeted about $40 million this year to expand its data centers and cover the licensing fees for about 1,000 movies and TV shows to be available this year.

Verizon Communications launched FiOS TV in 106 communities in New Jersey; in Virginia Beach, VA, Venice, FL, Montgomery County, MD.AT&T launched U-verse IPTV service in San Jose and San Ramon, CA; New Haven, Stamford, and Hartford, CT; Anderson, Bloomington, Muncie and Indianapolis, IN.

Verizon also announced that it will start providing local TV channels in many markets, beginning with Washington, DC.The company has also increased broadband speeds to 50Mbps downstream, 5Mbps upstream in many markets.

Just before New Year’s, somebody named “Muslix64” posted a video on YouTube claiming to show that he or she had cracked the AACS encryption used on both new DVD HD standards.It is now clear that the “crack” is really a “hack.” Muslix64 probably disassembled a player, found the decryption key in firmware, and then was able to post keys on the ‘net for various existing Blu-ray or HD-DVD features.But keys for future releases can always be changed, requiring a similar laborious process for hacking each new release.

Still, the disclosure clearly makes both issuing content and owning one of the new DVD players riskier.For content owners, as the formats become more widespread, the likelihood of a hack for any particular release increases.For player owners (i.e. consumers), DVD purchases are likely to stop working at any time, as content owners change the keys because a hack has been discovered.Thus, in a perfect illustration of Gresham’s Law on the Internet, the bad will drive out the good: anytime a hacked video appears on a file sharing network, consumers will either need to download it or risk never being able to play the content in one of the HD formats.

Around 150 titles have already been released in the formats, all of which are now compromised.For more on this issue, see the forum on which the hack was posted: forum.doom9.org.

IPTV providers thus far have had the same middleman relationship with content providers as have traditional cable operators.This is likely to change by 2008.Execs at NBC Universal, HBO and CBS have told us they are expecting to assemble their own combinations of existing or customized channels as pay suites, entailing either direct payment by consumers or payment through IPTV providers.

The strategy would create content-owner-controlled multichannel tiers—for example, all HBO or all ESPN channels—for monthly fees.The services could be offered either as web video or as prioritized IPTV traffic, or as both.Consumers could subscribe to the tier directly as web video, thus putting pressure on IPTV operators to pass along a larger percentage of payment for alternative prioritized IPTV carriage to the channel. Stronger bargaining power for channels may also render potential “net neutrality” issue moot.

It has been said that IPTV allows disintermediation of channel programmers, with content providers free to put up their own web sites and strike deals directly with IPTV operators.Channel aggregators may prove that IPTV also allows the opposite power play.

Omneon Video Networks seeks up to $115M; BigBand Networks seeks up to $140M.Both companies filed over the Christmas break.

Omneon, founded in 1998, is famed for its extremely cost-effective, scalable and reliable video/media servers.Company’s S-1 says they had 2005 revenue of $54M, already had $60M in revenues in 9 months ’06 with gross profit of $36.6M.Over 60% of revenue comes from outside the U.S., an indicator of how week U.S. broadcasters’ capex is now.The company thinks it has about 10% of the world market; it competes with Avid Technology, Harris Corp., Thomson, Sony, EMC and many others.

BigBand had revenues of $71M in 2005, $113.6M in 9 months ’06 with gross profit of $57.4M.About 70% of its revenues come from 5 customers, all U.S.-based: Verizon, Time Warner Cable, Cox Cable, Adelphia and Comcast.In selling its high-speed data and VoIP products for IPTV and cable TV, it faces major competitors Motorola and Cisco Systems.

111Pix said at NATPE convention it has “over $200M” in funding but won’t say where from.Business model is to offer downloads from multiple producers, using patented software that tracks rights and manages content.Management includes veteran heavyweights: feature producer Elliott Kastner and international TV salesman Tony Lytle.

Heavy.com closed a $20M round from Polaris Venture Partners, which previously invested $10M. Heavy will use the cash for international growth and launch of new Heavy-branded sports and teen sites in the U.S.User-generated content is a major part of its growth strategy.

Arris Group has agreed to acquire Tandberg TV for Nkr96/share, about 47% higher than Tandberg’s 3-months’-preceding trading price when the deal was announced and totaling about $1.2B. But Tandberg’s stock jumped to about Nkr110 after the announcement, meaning Arris may need to sweeten the deal or face the possibility a competitor may jump in.

Georgia-based Arris’s own market cap is only about $1.4B.Arris is the telecom/cable-network provider successor to longtime suppliers Anixter, then ANTEC, and the Nortel division that originated the cable modem; it has been growing solidly in recent years.Tandberg would bring strength in video encoding and channel origination.

The deal might be seen as answering just-before Christmas announced (Arris’s top competitor) Motorola plan to purchase (Tandberg competitor) encoder-maker Tut Systems.Tut is much smaller than Tandberg, but is more prominent in IPTV encoding.Motorola spent $39M for it.Arris/Tandberg together would have roughly equal weight in cable/IPTV supply alone to Motorola and other heavyweights Cisco Systems and Alcatel.

Since July, 2005, Frank Boersma has been responsible for managing development, testing and deployment of next-gen settops for VoD, interactive program guide and home networking. Prior to this work, Boersma managed FTTP Process Development and Subscriber Operations for Verizon.He joined Bell Atlantic Maryland in 1997; Boersma holds a BS in computer engineering from the United States Military Academy and an MBA from Loyola College.

A:We have to deploy.Our biggest challenge has been to get usable service to customers as quickly as possible. We told Wall Street that by the end of the year we’d have 175,000 TV customers.We haven’t announced any other targets yet, but we have to deliver.

Q:Verizon seems to be creating essentially the same kind of business as the cable operators: bandwidth segmented into video, voice and data, multichannel video service all the way to the home.What’s different about what you’re doing, other than the extent of your fiber installation?

A:Our super-headends are pretty unique.There are two; one in Temple Terrace, Florida, and one in Bloomington, Illinois.There are four redundant fiber-optic feeds from each of those to every one of our VHOs [video hub offices].Verizon as a telecom is well-known for its reliability over the years, and I don’t think you’ll find any cable company with this level of dependability.

Q: You seem to be competing basically on cost and quality, rather than on different services.

A:Clearly the objective for Verizon is to differentiate in higher quality and lower cost.But our services are also much more advanced.We didn’t want to be seen as an also-ran like the MSOs. Our home-media DVR—which was shown at the CES—combines a package of multiroom DVR service to every set or PC in the home.Our bundled media manager takes audio and picture content from the PC and displays it on the TV. Our “widgets” application allows you at the push of a button on the remote control to bring up local data on weather and traffic from the Internet on the TV.Our announcement here of our Interactive Media Guide …One of the key features is the ability to search all your content, on the DVR, on VoD, pay-per-view, as well as content eventually on the PC—search all of that and play it back in the TV.

Q: Verizon recently announced it is raising some data rates to 50Mbps.Does this come at the expense of potential video channels? How much more capability do you have to increase bandwidth?

A: We currently have 622Mbps downstream to up to 32 homes.Video uses about 850MHz and voice uses some additional bits.That’s all over three wavelengths all on one strand of fiber.That’s on our BPON network, and we’re just starting to deploy GPON, which will allow 2.4Gbps downstream and 1.2Gbps upstream, still over one strand.And of course we can light more strands eventually.Our competitors can’t match that capacity.

In slightly more than two years, analog broadcast TV will be dead in the United States. The move to DTV is about much more than switching from analog to digital TV broadcasting. Also in the mix are fundamental changes in the ways broadcasters produce, transmit, and store content—goodbye videotape, hello media server!—and the competitive market they now operate in: Hello multichannel centralcasting! Hello broadband! To get a handle on where the broadcast industry is today and where it’s going tomorrow, we spoke to National Teleconsultants managing partners Peter Adamiak, Eliot Graham and Chuck Phelan. http://televisionbroadcast.com/articles/article_1569.shtml

A broad selection of short films from the 2007 Sundance Film Festival will be available for purchase and download priced at $1.99 (US) from Apple's iTunes Store beginning Monday, January 22, 2007. Films are drawn from the 71 Sundance Film Festival short films, representing 19 countries and 4445 submissions from American and international filmmakers. Also available on the iTunes Store will be free podcasts that take you behind the scenes of the festival including engaging panels with filmmakers, journalists and industry representatives direct from Prospector Square and live performances straight from the Music Caf� in Park City.www.2-pop.com/articles/article_14565.shtml

In the heart of downtown Columbus, Ohio, WOSU, a public broadcasting station based at Ohio State University, and COSI (pronounced "co-sigh"), the Center of Science and Industry, have teamed up to create WOSU@COSI, a joint venture that brings television and radio broadcasting up close and personal to the public it serves. With two studios, two control rooms, three edit suites, and interactive exhibits, WOSU@COSI is the only science center/public broadcasting station site combination in the United States. http://governmentvideo.com/articles/publish/article_1068.shtml

If the flurry of activity at the close of 2006 is any indication, it would appear that DRM issues, royalties, licensing and portable media devices will remain a preeminent concern throughout this year. Initiatives undertaken by the RIAA and MPAA in the fall of 2006 certainly have raised eyebrows, as have both the changing world of consumer media devices and commensurate licensing agreements…. Reports out of Microsoft seem to indicate the company (and Bill Gates in particular) is beginning to undertake a rethink of DRM schemes and the ultimate impact those schemes have on potential consumers. http://medialinenews.com/articles/publish/article_1051.shtml

Following the 2001 release of David Lynch's last feature film, “Mulholland Drive,” the iconoclastic director spent a lot of his time using consumer- and prosumer-grade video equipment to create content for his Web site, Davidlynch.com, and falling in love with a new way of working in the process. The tiny cameras that he could hold in his own hand, the minimal crew, the speed of working, the ability to experiment on set-all these factors inspired him to use Mini DV cameras, specifically the Sony DSR-PD150, for an entire feature film. He worked on that film, which eventually became “Inland Empire,” starring Laura Dern and Jeremy Irons, for nearly four years in bits and pieces, writing and then shooting small sections at a time.http://www.videography.com/articles/article_14628.shtml

ContentSutra offers a comprehensive review of IPTV developments in India. www.contentsutra.com/entry/iptv-in-india-in-2006-tested-launched-but-not-marketed-to-users

Physics Web remembers by the end of the year that 2006 marked the 175^th birthday of James Clerk Maxwell, the giant without whom TV would have been impossible.It reviews his most important discoveries in easily understandable language.

http://physicsweb.org/articles/world/19/12/2/1

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EDITOR: Neal Weinstock 718-693-1001 n.weinstock@verizon.net	AD SALES: Toby Sali 310-396-9554 toby2@comcast.net
Reporters for this issue: Gayla Rhodes grengland@aol.com Jerry Azoulay jerrygda@aol.com Richard Trock trockr@earthlink.net

ContentSutra offers a comprehensive review of IPTV developments in India. www.contentsutra.com/entry/iptv-in-india-in-2006-tested-launched-but-not-marketed-to-users

Physics Web remembers by the end of the year that 2006 marked the 175^th birthday of James Clerk Maxwell, the giant without whom TV would have been impossible.It reviews his most important discoveries in easily understandable language. http://physicsweb.org/articles/world/19/12/2/1

ContentSutra offers a comprehensive review of IPTV developments in India. www.contentsutra.com/entry/iptv-in-india-in-2006-tested-launched-but-not-marketed-to-users

Physics Web remembers by the end of the year that 2006 marked the 175th birthday of James Clerk Maxwell, the giant without whom TV would have been impossible.It reviews his most important discoveries in easily understandable language. http://physicsweb.org/articles/world/19/12/2/1

Physics Web remembers by the end of the year that 2006 marked the 175^th birthday of James Clerk Maxwell, the giant without whom TV would have been impossible.It reviews his most important discoveries in easily understandable language. http://physicsweb.org/articles/world/19/12/2/1