10
The future: brave new world or just more of the same?
The new millennium has given every press and broadcasting pundit the opportunity to sound off on pet futurology theories. There are, however, one or two voices that should be listened to, the first coming from the cutting edge of the business marketplace and one global company who is well known for its sharp appreciation of customer trends and developments.
PricewaterhouseCoopers (PwC), in a report they called ‘A gaze into the crystal ball’, published in late 1999, speak optimistically about our digital future. Author Saul Berman says the Digital Age of television is upon us. ‘3-D, 360-degree audiovisual experiences are all the rage at theme parks … and the Internet has spawned a vital new home information, education and entertainment paradigm’. While no one can know for sure what the frenetically evolving, consumer-entertainment landscape will look like in the twenty-first century, Berman’s views of how his crystal ball is appearing makes interesting reading in the context of this book.
A future scenario
PwC supply some educated hypotheses about the near future of consumer entertainment, both within and outside of the home.
Hypothesis no. 1: Consumers and then technology (in that order) will determine the future entertainment environment. As consumers display an ever-increasing interest in, and demand for, active stimulation, companies will create innovative, ‘high-tech’ content and software to satisfy those desires. But woe to those corporations that get caught up in the ‘gee whiz’ of the laboratory and fail to properly monitor the market. PwC say both will be needed to produce the ‘cha-ching’ of the cash register.
Hypothesis no. 2: Consumers will experience more stimulating content, audiovisual sophistication and interactive technology in their entertainment choices. Interactive technology will be prominent both in and out of the home. Within the home, consumers will take a hands-on role in creating new and differentiated content, with programming presented in menu-driven format. Outside the home, they will also be afforded new and distinguished choices to interact with and actually create content. Companies will extend their corporate and product brands into these new entertainment choices. A good example is Disney’s plan to spend more than US$1 billion over the next 10 years to build as many as 30 DisneyQuest centres, equipped with virtual reality, Internet and computer-based gaming.
Hypothesis no. 3: Consumer electronics, high-tech and gaming companies will become major players in alliances and partnerships set up for content creation, a space currently dominated by the purveyors of more traditional, passive entertainment (for example, studios, broadcast networks, cable MSOs and publishers). Examples of this trend include Sony’s foray into video games with the Sony Playstation and Microsoft’s significant presence in CD-ROM titles.
Hypothesis no. 4: A more interactive, sophisticated entertainment model will spawn greater two-way interaction with the Internet and online services, and diversified programming options. The big question is: who will take us to the broadband promised land, providing us with the fat communications pipeline to make our twenty-first-century dreams a reality? The answer is a yet-to-be-determined combination of telco, cable and wireless companies with each pushing one another to innovate and to cut costs and inefficiencies from their business. Emerging players such as satellite companies and potential new players such as utility companies will join the race in the future.
Hypothesis no. 5: Once we have achieved this new, open, multi-channel environment, distribution will become increasingly ‘commoditized’, with money made on a volume rather than a quality basis. The creation and presentation of content will assume an even higher place on the entertainment ‘value chain’. Thus, in the end, content will indeed be king.
Hypothesis no. 6: PwC suggest that an ironic trend in mass consumer entertainment advertising will intensify as an increasing proportion of the US population reaches senior citizenship. These arguments also apply elsewhere in the developed world. Consumer entertainment offerings will skew toward (at least the perceived) tastes of the 18-35-year-old demographic. The younger generation is typically the most influential age group, as it is most likely to try out new products and to adopt new trends. Even as this younger demographic shrinks, it will be prized as the most desirable target group and aggressive marketing efforts to win its favour will dominate in this new century. Advertising dollars will flow to where the young eyeballs are.
Hypothesis no. 7: The proliferation of consumer devices and appliances will decrease as the features they offer start to overlap. However, the television in the living room and personal computer (PC) in the home office will continue to maintain their separate identities, albeit with more similarities than the current environment. For example, television will offer interactive, menu-driven features through sophisticated set-top boxes as well as Internet access devices (for example, WebTV). Personal computers, in turn, will be able selectively to access programming from broadcast, cable and satellite transmissions.
Hypothesis no. 8: PwC says that digital television will eventually succeed in the USA, although the US government may have to push back its 2006 mandate for majority conversion to digital broadcast. Costs of consumer equipment and upgrades are not expected to drop as quickly as needed and the economics of digital television are in question. Moreover, it is unclear whether broadcasters will use the digital spectrum to offer one high-definition channel or multiple low-definition channels. That aside, broadcast television has clearly entered a new phase and will never be the same.
Hypothesis no. 9: Purveyors of today’s relatively passive, traditional entertainment content must – and will – adjust to the new environment by melding their traditional and new media production capacities. In a PwC survey of 1010 consumers, 35 per cent of respondents said that the time they spend on the Internet comes at the expense of watching television; and 31 per cent said their Internet time comes at the expense of reading a book, newspaper or magazine. Traditional forms of entertainment clearly are losing eyeballs and mindshare, but traditional entertainment companies have recognized this shift and are leveraging their brand and resource power to create ancillary products (for example, consumer products, interactive software).
Hypothesis no. 10: Mergers and alliances between the traditional and non-traditional entertainment players will proliferate. Computer hardware and software, consumer electronics, Internet service and digital broadcast satellite companies will broker deals with their traditional entertainment brethren, seeking those oft-touted, sometimes elusive synergies.
It is worth remembering that these ten hypotheses are some-what USA-focused. PwC rightly talk about ‘convergence’. It’s an overused word, but anyone who doubts the linking together of broadcast television, telephony and computing has only to look at how digital compression technology has been overlaid onto the new generation of cell phones to deliver breathtaking possibilities.
The likes of CNN have provided a ‘direct to cell-phone’ service for some time. They, and others, see consumers as always ready to consume more hard news, whether it is stocks and shares, sports or just a missed recipe from yesterday’s cookery show.
Radio is also going to be important in the home, whether from one of the established services or new technology standards, such as ‘Bluetooth’, for in-home appliance control. Bluetooth is the snappily named creation of the cellular telephony industry (in particular Nokia, Ericsson, Intel, IBM and Toshiba, and about 800 other industry members) which is designed to provide standards-agreed, enabling link technology between various modem-linked items in the home. Bluetooth was a tenth-century Scandinavian king, who united various warring groups in his region. The comparison with ‘warring cell-phone companies’ is perhaps apt.
A home today might easily have a television that is linked to the Internet (for example, Canal+’s MediaHighway system, or BSkyB’s Open …), together with a desktop PC with a modem, a portable PC with a modem, and a Palm Pilot or Psion organizer-type device with a built-in modem. If we look a little further ahead, the home might also have a refrigerator with bar-code scanning, linked to a modem (Ericsson is working with Electrolux on a range of next-generation products including refrigerators, washing machines and other home appliances).
How would Bluetooth work in this sort of environment? The theory is that the white goods-buying population, which in Europe spends around US$15 billion a year on refrigerators, cookers and the like, will be increasingly tempted to buy equipment with this sort of extra functionality. A refrigerator, with a flat-panel screen, for example (ideal for calling up a recipe, or maintaining the kitchen diary) would monitor, via a bar-code scanner, what is placed in it and removed from it. Making up a shopping list becomes easier, and ordering the replacement items via the television or PC-link for home delivery even more so. Bluetooth technology, when linked to a central processor unit (CPU) in the home, gives users the ability to ‘talk’, via a cellphone, to and between these devices.
Bluetooth works in the 2.4 GHz band, and is designed to operate at low power but also to ‘see’ around corners and through walls, to a range of about 10 m. Amplifiers can be used to boost this signal range. Bluetooth’s main advantage, however, is that there are no wires or cables. Aside from the high-tech applications, there are companies working on other, fundamentally useful interpretations based on Bluetooth, for example, an alarm device that is worn, which immediately notifies the central processor of a problem with an elderly or infirm person?
This book is not about kitchen appliances or heart monitors, but one can see how the various emerging technologies are coming together to provide greater control and linkage within the home. Meanwhile, as far as digital television is concerned, the greatest interest remains in the clear and obvious developments in the entertainment sector.
Technically, in the same way that PC users are increasingly using neat, flat-screen digital displays in place of bulky, cathoderay tube PCs, so home users will soon be buying large-area, flat-screen monitors for home use. At 1999–2000 prices, around £8000–10 000 (US$12–15 000) in Europe, they are simply too expensive for mass-market adoption, but there are increasing signs of these prices softening as quantities increase and development costs are amortized. As a guide, prices have halved since 1997, and this trend shows no sign of slowing.
Nevertheless, in the following sections are the core products and industry sectors that concern us in this summary chapter.
1 VOD/NVOD and PPV – we cannot avoid it
We’re not looking for other businesses to launch on the back of VOD and our movies.
Jack Waterman, president, worldwide pay TV,
Paramount Pictures Television Group[VOD] is no longer rocket science, needing an army of technicians. It is a straightforward plug-and-play system.
Yvette Gordon, vice president of interactive technologies,
SeaChange International Inc.
In May 1997, when Time Warner pulled the plug on its much-hyped Full Service Network (FSN) system in Orlando, Florida, the picture looked very different. At the time, in May 1997, many observers questioned the wisdom of cable operators or broadcasters in general investing heavily in the complex and expensive head-end kit needed to supply viewers with everything from the instantaneous delivery of programming – video-on-demand (VOD) – to the speedy delivery of a mozzarella-heavy pizza.
Even Time Warner chairman Gerald Levin, in a widely published interview in 1997, admitted at the time that FSN was ‘off the mark,’ and that ‘he who makes a living from a crystal ball must learn to eat ground glass’. The costs of the experiment were reportedly in the US$100 million range.
To give credit to Time Warner, and other similar VOD tests and trials that have taken place over the past few years, many were deliberately designed to put leading-edge technology through its paces. The technologies worked just fine, but the business models all too frequently failed to match expectations.
Despite enormous optimism about VOD’s brightening picture, there are some who question whether or not all the ground glass has been swept away. Among those concerned about getting cut by a sliver or two is Hollywood. Some movie studio executives express large reservations about how VOD is developing. At the same time, the lowered cost of technology and the roll-out of digital systems that enable two-way communications are making operators and technology companies much more optimistic.
‘VOD is the killer application,’ Leigh Wood, chief operating officer of Britain’s largest cable operator NTL Inc, says as she talks about the company’s roll-out of digital services during 2000. In her opinion, VOD is the application ‘that differentiates us wildly from the competition’. By competition, she is referring to not only the direct-to-home platform British Sky Broadcasting plc, but digital-terrestrial television as well.
Get it right and the prize, according to estimates from a leading research company (Forrester Research Inc.), is a glittering share of the US$8 billion-a-year video-rental market. Forrester predicts that by 2005 cable’s VOD efforts will reap around US$3.1 billion of that market. Direct-to-home satellite ‘buys’ will only add to that revenue stream.
Further understanding of VOD’s potential comes from the US programmer Showtime Entertainment Television (SET). It reports that in the first six months of 1999, the US-generated PPV revenues of US$267 million from ‘events’ alone, up 114 per cent more than in the same period in 1998. Boxing and wrestling made up 98 per cent of the total.
Helen Britton is the Los Angeles-based vice president of programming for yet-to-launch (as at May 2000) VOD service DemandVideo Corporation. She notes that there is a ‘huge’ difference in buy-rates when operators move from PPV to Near-Video on Demand (NVOD), which is a middle-ground between PPV and the instantaneous delivery of programming afforded by VOD. But how much will the buy-rates increase when systems move from NVOD to pure VOD? ‘That’s a question that nobody knows the answer to right now’, she says.
Britton explains that large distributors of programming pose a number of questions about the future of VOD. Needless to say, most queries have to do with revenue. ‘Right now, there are very few VOD households, and it costs [the studios] probably US$25 000 to US$500 000 just to do one of these [VOD distribution] deals. There’s costs like staff time, lawyer time, tape transfer,’ she says. While the studios have participated in several VOD tests, ‘it’s cost them a lot of money, and so far they aven’t gotten anything in return. Now they need evidence of [subscriber levels], effective technology and a business strategy that indicates that the VOD companies will produce revenues back to the studios.’
‘Is there a need for VOD?’ Jack Waterman, president of worldwide pay TV for Paramount Pictures Television Group, asks when speaking about NVOD versus VOD. Paramount, through parent Viacom, has ties to home-video giant Blockbuster, another firm that has reason to consider VOD a potentially huge threat to the bottom line. ‘What does a consumer get from VOD that they don’t get from NVOD?’ Waterman questions.
The opportunity does exist to exploit library product in addition to just new movie titles, but ‘it costs a lot to convert to the VOD environment,’ Waterman says, speaking not about his own studio’s costs, but about the cost to operators.
Perhaps of even more crucial concern to Waterman is how cable systems will package VOD services with other interactive offerings made possible by two-way digital technology. ‘We’re not looking for other businesses to launch on the back of VOD and our movies,’ Waterman says. ‘A lot of companies are looking to do e-commerce or repeat viewing of [regular TV programming].’ He contends that operators need to build firewalls between those businesses and VOD so they don’t cannibalize the VOD revenue stream for studio product. ‘I’m looking to sell movies in the most effective way we can.’
Technology companies contend that programmer concerns about the economics of VOD have been resolved. For example, SeaChange International (based in Maynard, Massachusetts) says it has more than achieved operators’ objectives of lower-cost servers that do not require an army of technicians.
Yvette Gordon, vice president of interactive technologies for SeaChange, says today’s VOD is very different from the Time Warner FSN trial in Orlando, particularly when it comes to cost. ‘if you looked at the FSN or Omaha trial, they were far too expensive. There were two parts to that expense – first with the capital costs, and second the operational costs of the trials – in other words the number of people needed to keep the trials up and running.’
Gordon contends that costs have declined so much that it now makes it possible for a business plan to work. VOD ‘is no longer rocket science, needing an army of technicians,’ she says. ‘It is a straightforward, plug-and-play system. It’s a huge difference.’
SeaChange in 1999 said that this reduction in costs and overall flexibility provides a very real option for modestly sized systems to climb aboard the VOD train. ‘We calculate the breaking-point system as being 1000 streams, which is 10 000 subscribers. below that figure, the break-even into profitability might be longer than our two-years-or-so ideal. But above 10 000 subscribers, we are very comfortable about a two to three-year payback,’ adds Gordon.
SeaChange file-servers have been selected for a VOD trial conducted by UK MSO Telewest Communications plc. Competitor nCUBE Corporation is also involved with the Telewest trial with one of its MediaCUBE scalable video servers initially supplying 825 simultaneous streams for a 20 000 households split across two franchises. SeaChange has also been picked for China’s Guandong GDCATV system. Guandong province is one of China’s richest regions, and the system there plans to use SeaChange hardware primarily for educational services. GDCATV is providing ‘a large library of educational programming’ to serve some 400 000 households by the end of 2000, according to SeaChange. The systems integrator is Guangzhou-based Global Net Broadband Industry, which has also developed specialized set-top boxes for the scheme.
Clearly, companies like SeaChange and nCUBE are gearing up for big business ahead. Another rival is Concurrent Computer Corporation, which was recently selected for a Time Warner trial in Tampa, Florida, involving 877 000 households. The test is ‘three times the size of the [SeaChange] Austin trial. We were competing head-to-head with [SeaChange], waiting to see who would be selected, so we consider Tampa a big win,’ brags Andrea Ariza, Concurrent’s vice president of corporate communications.
Concurrent’s stock price doubled in November 1999 after the company acquired competitor Vivid Technology in a stock-and-cash deal valued at some $US20 million. ‘Vivid was attractive because even though it was a small company, it had an excellent video server, and in addition they have an excellent relationship, and technology solution, for General Instrument [Corporation] equipment,’ says Ariza. She adds that because GI equipment is in some 70 per cent of US cabled homes, it was vital to come up with server solutions for GI customers.
Also looking to cash in on VOD is California-based Diva Systems Inc., a full VOD system provider offering everything from equipment to programme content. Diva normally expects cable operators to pay it a flat amount per subscriber to cover hardware and installation costs. Then, once VOD revenues hit a pre-agreed level, revenues are split between Diva and the cable operator.
Once installed, Diva offers viewers a large roster of VOD programming, including movies, children’s shows and speciality programming, along with the ability to pause, fast-forward and rewind the programming.
Diva has struck programming deals with almost every major American content provider, including Hollywood studios Warner Bros, Walt Disney Co., Sony Pictures Entertainment, Universal Studios, Twentieth Century Fox, Dreamworks SKG, MGM International TV Distribution, New Line Cinema, and Polygram. It also has agreements with channels such as Home Box Office, ESPN, Discovery Communications, National Geographic TV, PBS and Playboy Entertainment.
Diva says its research indicates that operators can expect typical buy-rates of 3.5 to 4 purchases per subscriber per month. However, SeaChange’s Gordon predicts that European buy-rates won’t hit the four-a-month level that VOD consumers in the USA are expected to reach. She suggests that, as VOD moves away from the mainstream programming that has dominated PPV in the past, such as adult, movies and sports, and moves into genres such as children’s shows, it could bump up the buy-rates.
Clearly, Diva is about to test the predictions in both the USA and Europe. In September 1999, it struck a major agreement with MSO MediaOne Group for a number of markets in the United States. Additionally, Diva confirmed a relationship with UK-based set-top maker Pace Micro Technology in May 1999 that allows Pace to integrate Diva’s solutions for two giant MSOs in the UK, Telewest and Cable & Wireless Communications. NTL (which is in the process of absorbing Cable & Wireless’s systems) has also contracted with Diva for a trial in Woking, a large commuter town south-west of London.
Diva is working closely with Yes Television, a regional VOD operator in the United Kingdom, which has a VOD trial in Cardiff, South Wales, using Scientific-Atlanta boxes. Yes Television isn’t limiting itself to the UK; it plans to roll out in Thailand (with local partner Broadcasting Network Thailand) to around 800 000 passed homes. The technical trial is taking place in early 2000. A similar deal has been struck with South Korean Internet-service provider, ThruNet.
One of the most advanced VOD projects occurring in Asia right now is in Hong Kong, where the telco Cable & Wireless HKT has provided genuine VOD since March 1998. It operates its asymmetrical-digital-subscriber line-dependent (ADSL) VOD service through subsidiary company IMS. That unit’s spokes-woman, Anna Ngai, says the service began with just 200 hours of material, and has now grown to well over 1000 hours of programming.
IMS is getting added strength from a news-on-demand deal with Reuters, and a recent agreement for multimedia services with programming platform STAR TV, which is backed by News Corporation. It has also linked up with Microsoft, which will use the system as a main test-bed for software merging television and PC technology. Microsoft chairman Bill Gates, in a local Hong Kong report published in March 2000, stated that Hong Kong’s ADSL system is ‘the best place in the world’ to try true video-on-demand over the Internet.
Subscribers to the service, which uses the brand name iTV, pay about US$35 a month, a figure said to be some 50 per cent of what it actually costs IMS to provide the service.
However, local industry insiders are highly critical of iTV. Its business plan originally promised 250 000 subscribers by March 1999. The actual numbers were closer to 80 000 at that time.
Allen Ma, head of iTV, has rolled back his projected break-even date by two years to 2003 and freely states that VOD movies, Karaoke and horse racing are not enough to drive the business plan forward. In his view, the killer application will be Microsoft’s content input.
The picture is just as confused in Singapore. Magix, Singapore Telecom’s brand name for its VOD service, was launched in November 1997 using ADSL technology at speeds up to 8 mbps. It had only signed up 14 000 subscribers as at April 1999 – far fewer than Hong Kong’s iTV. Yet observers say Magix’s technology is impressive. Singapore Telecom acknowledges mistakes were made during the initial learning curve, and now states that it is concentrating on sales and marketing.
Another company heavily committed to VOD is British Telecommunications (BT). It is backing a major West London VOD trial using ADSL technology, and it has a buoyant view of its prospects. BT says it will upgrade 400 local telephone exchanges, covering about 6 million homes, to supply VOD, interactive and Internet content, starting in the spring of 2000.
Graham Mills, BT’s director of visual and broadcast services, is closely involved with the trial. He predicts a healthy future for conventional movies shown in a VOD system, but also suggests spectacular growth possibilities thanks to Internet-protocol-based, eb-streamed content (of which more in a moment).
Mills reckons that once viewers become accustomed to programming-on-demand, they will quickly expect increasing flexibility and sophistication in what is offered. ‘I can easily see the Hong Kong community in London having all the Hong Kong channels and services available to them,’ Mills says. ‘The same would apply to Brits who want to hook into the Los Angeles area or else-where in the world. It will mean TV is available anywhere, anytime.’
Such rosy outlooks are tempered not only by the historic results of VOD so far – but also by those who are trying to troubleshoot the issues up ahead. ‘There’s side issues like copyright protection,’ says Britton. ‘Also quality of picture issues, the rate for data transfer.’ Most Hollywood studios, for example, won’t allow VOD streams below 4 megabytes per second, according to Yes TV’s head of marketing, Steve Garvey.
These are issues that VOD providers and programmers have talked about until they are blue in the face. But trying to avoid such shards of ground crystal that could deflate the VOD promise is likely to make the reality a lot more solid.
To glibly suggest that all these issues can be ignored would be foolish. There may well be technical problems as well as problems of customer use. However, this writer firmly believes the days of the video rental store are numbered. PPV, in all its different guises (VOD, NVOD and instant response) is here to stay, and will capture a growing slice of our previous leisure time.
2 E-commerce … another unavoidable trend
E-commerce is a hugely diverse area of goods and services, where the PC (and therefore Internet-based) world of on-line shopping has, thanks to digital television, begun to migrate to the television set. It seems there is no end to the global services that can now be shopped for on-line.
From the embryonic ground work undertaken by suppliers such as Amazon.com (books), CDs, clothing and specialist suppliers of seemingly every product under the sun, the television-based retailers are building their own operation. However, the revolution is not as dramatic as one might think; in the UK, a huge proportion of family holidays (especially last-minute vacations and weekend break bookings) are prompted by Teletext-based advertising.
Teletext is the brand name of a UK news/information and advertising television service that uses the analogue vertical blanking interval of a TV picture. Other broadcasters use the technology for similar text services. A matching, and visually improved, system exists in the digital world usually incorporating graphics-rich information, pictures of holiday destinations, houses or cars for sale, clothing for sale, etc.
Consequently, travel is an area where broadcasters see considerable revenues being generated off-the-screen. TV Travel Shop in the UK (a Flextech subsidiary) launched in 1999 and similar operations exist in mainland Europe. They allow viewers on one level to view a travelogue programme about this or that destination; if they delve deeper they can look at a specific hotel, perhaps even a hotel room. Either on-line or via the interactive digital television, viewsers can even call up a ‘virtual’ tour of the location, booking it if they want and adding flights, car-hire, insurance and all the other revenue generating elements of a typical holiday.
But ‘Open …’, the interactive television service from a consortium that includes BSkyB, sees us using our digital television sets for much more. It has tied up with supermarkets, travel service companies, music and video retailers and many others to create a complete shopping centre experience ‘all from the comfort of your armchair’. Sending and receiving e-mail is also possible.
Open… opens its doors
October 12 1999 saw Open.… come alive. Trials at the midday launch on 12 October were impressive, with speedy e-mail access and rapid access to the various vendors. Open… chief executive James Ackerman was buoyant about the number of sales already completed, with 10 000 homes ordering the interactive keypad (at £34.99) within the first few hours.
Ackerman announced that confectionery retailer Thorntons had joined the scheme, together with UK savings and loan company (building society) The Woolwich. Firstcall Direct joined a few days, later offering viewers tickets for theatre, music and sports events.
However, there were early reports (since cured) of clogged telephone systems, especially on the BT-supplied Talk 21 e-mail link. One report published in October 1999 spoke of ‘thousands of people who cannot get a connection’ and attempts over the first eekend to gain access to the system were totally fruitless. Other additions were made. The wireless keypad arrived in time for Christmas 1999 with Open… levying a 1p a minute charge for its e-mail service, in addition to on-line telephone costs.
While the undoubted attractions of up to eight e-mail accounts per home cannot be denied, some might argue that those pennies will quickly add up, especially in an age where ‘free’ Internet is increasingly available.
The Open … High Street
| Woolworths | Dixons | W.H. Smith |
| Domino’s Pizza | Carphone Warehouse | Somerfield |
| Manchester Utd | Kitbag Sports | Yalplay |
| HSBC | First Call | Argos |
| Gadget Shop | Gameplay | Iceland |
| Next | Going Places | Abbey National |
| Woolwich | e-trade | Hasbro |
| Shop! | Yellow Pages |
The Open… service is not the Internet, but what is called a ‘walled garden’, a safe area where there will be reliable retail names and no surprises or shocks. Many of the retailers offer matching services on the Internet, using the same back-office fulfilment systems. Open… sees the day when there are four million or more subscribing homes, able to address its offerings. Like Internet-based services, it sees viewers using Open… to book their travel tickets, cinema and theatre bookings, holidays, and the like. Time will tell if it is successful in its aims.
The growth in the Internet is by now well-known. Some statistics are given in Table 10.1.
It is undoubted that the Internet will increase in importance. Indeed the highly regarded USA-based Forrester Research organization predicts that by 2003 some 9.7 per cent of all US business will be conducted through the Internet. Jupiter Communications predicts that Internet penetration in Europe will rise to 31 per cent by 2003, by which time some 47 million households, some three times higher than at the end of 1998, will be online. The European IT Observatory suggests an even higher number, predicting that by the end of 2002 some 93.3 million users in Europe will be regularly accessing the Internet, a compound growth of some 26 per cent per annum, which is nothing short of staggering.
Table 10.1 European household online penetration*
| Country | 1997 (%) | 1998 (%) |
| Norway | 13.7 | 26 |
| Sweden | 12.5 | 23.8 |
| Denmark | 11 | 20.7 |
| Finland | 12.3 | 18.3 |
| Austria | 7.5 | 16 |
| Switzerland | 10.1 | 15.6 |
| Netherlands | 6.6 | 12.7 |
| UK | 6.6 | 12.7 |
| Germany | 7.2 | 11.5 |
| Belgium | 4.3 | 6.5 |
| France | 2.6 | 5.9 |
| Spain | 2.5 | 4.5 |
| Italy | 1.3 | 2.7 |
| Rest of Europe | 0.9 | 2.6 |
| Central Europe | 0.6 | 1.3 |
| Russia | 0.1 | 0.5 |
* Source: Dataquest (mid-1999)/Merrill Lynch
To what extent television-based e-commerce will encroach on this potential market is as yet unproven. But BSkyB has, from its own market studies, created an attractive business plan for future business.
Digital television has another Internet-based role, however, already described in a previous chapter. Many broadcasters and programme makers see their channels and individual programmes as portals to further information, extra levels of data and the inevitable opportunities to earn more cash, or at least retain viewer loyalty.
The big changes
This brings us to our ‘top four’ predictions for digital television and its next stages, drawn from previous chapters.
1 Personal video recorders (PVRs)
Put any two so-called experts together and you will have two different views of where the next television revolution will come. Few doubt, however, that one important development is the new generation of set-top boxes now beginning to emerge, which essentially allow viewers to throw away the VCR. The new personal video recorders (PVRs) have computer-type hard drives of some 15–25 Gb, which is probably five to ten times the size of the hard drive in use on most PCs. Moreover, their recording capacity will increase dramatically over the next few years, with some experts predicting over 100 Gb of storage within five years or so. If correct, this places a high-capacity file-server in every home.
These PVR set-top boxes, as well as picking up satellite and cable signals, allow viewers to record programmes, just like the VCR. The key difference is the ‘intelligence’ built into the PVRs. This ‘fuzzy logic’ intelligence monitors a user’s viewing habits, and if the pattern is to watch Friends every Thursday evening, the equipment can automatically record an episode if the viewer forgets to set the equipment. Two systems (TiVo and Replay) are already on sale in the USA, and other broadcasters plan their own launches during 2000.
2 ADSL technology
Another favoured option is ADSL (Asymmetrical Digital Subscriber Line) telephone technology. Utilizing digital technology, telephone companies can supply almost any number of channels down an ‘ordinary’ telephone line. The line is transformed into a fast, two-way pipe capable of running video, interactive games and television on demand. It will have been significantly upgraded, vital if bothersome (and technically disastrous) pops, clicks and static stay on the system. The line is also enhanced at the telephone exchange, with the telephone company supplying a choice of channels just as if it were a satellite or cable company. These ADSL technologies are now being widely converted from trial status to full implementation.
3 Web-casting
‘Television’ is already available on the Internet, and outfits like Bill Gates’ WebTV are increasingly seeing the power of using web-based technology to marry Internet-delivered signals with the television set. Though it is generally accepted that the PC is being used for ‘lean-forward’ activity, while the TV set is ‘lean back’ or relaxation mode, the lines are being blurred, with television increasingly being seen as the most attractive device in supplying home-shopping, banking, and, for many people, e-mail. Most European and United States broadcasters now have a wide selection of ‘tele-shopping’ options.
The Internet is fighting back, though; awash with online shopping opportunities, the Internet is becoming increasingly sophisticated about the entertainment it can supply. Have a look at www.broadcast.com if you have any doubt.
4 Micro-television
Broadcasting is expensive. Besides making or buying programmes, there is the cost of transmission. Sending the signal up to a satellite is also costly. Digital transmission helps cut these costs, but there is a new twist emerging for would-be broadcasters. By 2003 satellite transmission will, in the words of EUTELSAT’S director-general, Giuliano Berretta, ‘be democratized’. Transmission bit-rates of about 2 Mb will increasingly be used – at least for some services – squeezing 18 channels into the space normally occupied by one analogue channel.
More channels mean dramatically less expensive transmission charges, and there is talk of even further cost-savings down the line. Such technology developments will change our television lives, no less dramatically than they have been changed since 1990. What has not changed that much is the amount of time viewers spend watching television, and few doubt that television will continue to be our prime supplier of leisure entertainment. What is already changing – and we have examined the trends in other chapters – is the number of niche and minority channels that tempt us to tune in for a few moments. Whether Discovery Wings is that different to a Military channel, or whether Discovery Civilisations will appeal more than The History Channel is a matter of consumer choice. What is inviting is a Discovery Kids channel that gives youngsters something other than a non-stop diet of animation.
If nothing else, then we must welcome the digital broadcasting entrepreneurs who are creating these new television opportunities. Are these actually new channels, or just a rehashed packaging of old repeats? I prefer to think of them not only as genuinely new, but as a real opportunity to see material that is near-perfectly packaged for a viewer’s specific taste.
What is also fascinating is the amount of live, brand-new television that we might now get an opportunity to see, thanks to multi-channel television. During 1999, as well as the end-of-year Millennium celebrations across the world (and how many viewers in Britain saw the Jean-Michel Jarre concert from the Pyramids?) we were able to dip into the Venetian gondoliers race, live thanks to Italy’s RAI TV, and to a wonderful fiesta in Catalonia – no fighting bulls but teams of youngsters building human towers with everyone standing on each other’s shoulders to seven and eight levels of humanity. Simple, yet captivating TV.
I see no reason why other viewers should not share these moments.
Final health warning
while talking of these ‘big changes’ in digital television, I am reminded of a conversation I had with a senior executive of a UK television rental company (the UK has a tradition of people renting their television sets) who pointed out that they still had more than 20 000 people paying for ‘black-and-white’ (monochrome) television sets, a generation or two after the introduction of colour television. Indeed, these customers had to be issued with colour sets that had been deliberately degraded to keep them within the government regulations on colour television reception (the UK government allows a licence fee discount for monochrome reception).
I make the point if only to remind ourselves that for every dynamic early adopter of these technologies there will be a matching laggard, and as Europe moves towards totally embracing digital broadcasting, not all viewers will be enthusiastic about a multi-channel future promising dozens or hundreds, let alone thousands of potential channels. Politicians everywhere will have to face the electoral consequences of balancing their enthusiasm for these new technologies while at the same time paying due regard to those members of the population who are less than enthusiastic for such social changes.