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“Movie downloading definitely has a place in the future, but its future is largely dependent on people forgetting that it has anything to do with a PC or broadband,” says Michael Greeson, president and principal analyst at The Diffusion Group (TDG). People don’t care about the source of their movies or what route the movie takes on its way to their homes, he says; they just want the movie and they want it now. And they want the process to be easy; and so far, thanks largely to dependence on the PC, the process has been far from it. “As long as the usage model was confined to the PC, the value of digital downloads has been very limited,” says Greeson. “And that’s why very few people have partaken. Our surveys show that less the 10 percent of adult broadband users have ever downloaded a movie. Now, that’s going to change, but gradually. I’m looking at a time horizon to critical mass (16-20 million users in the U.S.) of 3 to 5 years. You’re going to see broadband video incorporated into the television experience at a growing clip, but the problem is: getting it there as easily as possible. Once they get broadband video to the television set, then the movie download services will really start to take off.” INTRODUCING THE NEW IMPROVED ALTERNATIVE SET-TOP BOX
So what’s the easiest way to get a movie to a television set? In the cable world it is usually done rather easily through the use of a set-top box. But until recently most independent movie-buff Internet surfers were pretty much forced to tackle the complexities of setting up a home network (whether they really wanted one or not), so they could transfer their downloaded movies from the PC in the home office or bedroom to the TV in the living room. “Now you are seeing solutions coming out that are saying: forget the PC altogether; let’s just give you a set-top box that you can hook up to your television set and a broadband connection, and there you go, you’re in. Leave the PC out,” says Greeson. These new standalone broadband set-top boxes represent a whole new world for movie downloading, according to Greeson. So far, it is a very small world dominated by two primary participants – Apple TV and VUDU. But the general approach has great potential, he says. Strictly speaking, these new devices like Apple TV and VUDU could be called “IP set-top boxes,” but the term is more commonly applied to the large array of IPTV set-top boxes from companies like Motorola, Thomson, Sagem, ADB, and Scientific-Atlanta. Such set-top boxes are used by telcos to create proprietary closed-loop IP networks for the delivery of TV and live video, and thus, compete with cable. In contrast, this new breed of telco-independent consumer devices is, to quote Monty Python, something completely different. “I don’t know if there’s a great succinct name yet for the category of products represented by Apple TV and VUDU,” says Kurt Scherf, who has been closely following this emerging market as VP and principal analyst for Parks Associates. “I’ve called them ‘alternative set-top boxes’ or ‘alternative video-on-demand boxes.’ You could call them ‘over-the-top video boxes’ or ‘broadband video boxes’ would work, too.” Well, “alternative” is probably the best adjective to use in describing these devices, and you may as well jettison the term “set-top” altogether, since nothing literally sits on top of TV sets anymore, since the flatter, thinner digital TVs have arrived. How about “alternative broadband VOD boxes”? Michelle Abraham, a principal analyst at In-Stat, calls these boxes “Internet set-top boxes” and agrees with Scherf that the terminology is confusing and still evolving. She also agrees that these devices are a breed apart from the “standard” IP set-top boxes. Whatever you call these boxes, their advantage, according to Greeson, is their independence from proprietary IPTV and cable systems, home networks, and--above all--the PC. “The first version of Apple TV required it to go to the PC and from the PC out across the network to set-top boxes and into the TV. Now, the new version of Apple TV (they call it Apple TV Take 2) doesn’t require a PC, which was a smart move on Apple’s part. But VUDU beat them to the punch, introducing a standalone set-top box that you just hook up to your TV and your broadband,” says Greeson. “Any time you invite the PC into the equation, you are setting yourself up for complexity. The virtue of these new VUDU set-top boxes is they really are plug and play, much like your old solid state consumer electronics. You plug them in and the setup is real, real easy.” Greeson personally owns a VUDU box and he says he was really impressed by how easy VUDU made the setup procedure. “In my living room I’m doing direct Ethernet connection into the VUDU box and HDMI from the VUDU box to the TV set. It’s just like cable; it’s a very elegant experience.” In comparison, digital media extenders “are still significantly more complex to set up,” says Greeson, and setting up a home network, in general, is still miles away from being an elegant experience. This doesn’t bode well for the success potential of the PC/home network alternative, but it does bode well for the set-top box route, according to Greeson. THE ALTERNATIVE SET-TOP BOX CONTENDERS
Right now you can count the number of “alternative broadband video box” providers on one hand. As already mentioned, you’d have to count Apple TV and VUDU on fingers one and two. TiVo may deserve to be counted on finger three, thanks to its movie-downloading partnership with Amazon. Then there’s the Internet-connectable game boxes: Microsoft’s Xbox and Sony’s PlayStation3. Are they set-top boxes? Well, if you set them on top of your set, they are.
APPLE TV
Apple is king of the hill in this new market niche, due to a head start provided by being king of the hill in the music download world--iPod, iTunes, iPhone, etc. But like most things Apple-made, it is somewhat constrained to the Apple world. Because it doesn’t want its captive audience to stray, Apple designed the box to be an iTunes-centric device. To make matters worse, in order to play content on an Apple TV, it has to be in certain formats. Fortunately, there’s an “Export to Apple TV” option in QuickTime and in some other third party content conversion tools. This allows users to re-encode unsupported formats into supported formats, but is that something the average non-geek movie buff wants to get involved in? Being tied to a proprietary platform like this is a huge constraint to anyone who wishes to be able to EASILY take advantage of the ocean of content awash the Internet. (But to be fair, this is also true to some extent of every box in this category; almost all of them all try to tie the user to a single content source.) As Greeson already mentioned, the first generation Apple TV box was not a standalone device. It was limited to being a network device. To take advantage of it, you had to hook it up to a PC via a network. Users would have to go to iTunes and download movies onto their PC; the Apple TV would then access the movies from the PC over a home network. When Apple released the Take 2 software for the Apple TV in early 2008, the box could then be connected directly to the Internet and used to access iTunes directly. Apple TV purchasers have bemoaned the fact that the machine doesn’t offer DVR capabilities, but that can be added through third-party software running on a PC. This, however, requires that you have your Apple TV connected to your PC via a home network. VUDU
The VUDU box burst upon the scene in the fall of 2007 after four years of secretive development by VUDU, Inc, a small start-up based in Santa Clara, CA. Its product team is made up of veterans from companies such as TiVo, WebTV, Openwave, 2Wire, Slim Devices, and OpenTV. The box embodies effortless video on demand sans PC. As the company proclaimed in their product announcement: “now consumers never have to leave the couch to watch their favorite movies.” VUDU employs MPEG-4 video and Dolby audio. Thanks to the use of P2P technology, viewers can usually begin watching their movie choices almost immediately and not have to wait for buffering – provided they have at least a 2 Mbps broadband connection for standard def content (which VUDU says is DVD quality) or 4 Mbps for HD (1080p) content. The major complaint about VUDU has been lack of compelling content (i.e., the latest and greatest movie releases from the major studios). On launch VUDU said it had a library of 5000 movies from “all the major Hollywood studios and 20 independent and international film distributors.” Later VUDU added about 100 High Definition movies and “hundreds” of TV shows to the library. Content can be rented or purchased. VUDU has also added to their library a bunch of B-movies from the 1940s and 1950s that can be rented for free. Another complaint about the VUDU box has been its price. Upon release in 2007 it cost $399. In January 2008 the company cut the price to $295 to put it closer in line to its main competitor, the Apple TV. COMPARING APPLES & ORANGES (or in this case, VUDUs)
Because they are so different, it is probably not fair to compare Apple TV and VUDU, but it is unavoidable. Whether you prefer VUDU or Apple TV may depend on whether you buy the argument that nobody wants a PC in his living room and, if so, how strictly you interpret the rule. What for one person may be VUDU’s or Apple TV’s biggest minus could be another person’s biggest plus. Take Parks Associates’ Kurt Scherf, for example. Like The Diffusion Group’s Michael Greeson, Scherf owns a VUDU box. While Greeson says: “VUDU is just incredible. I use it all the time,” Scherf is not as enamored. He liked how easy it was to set up but wasn’t much impressed beyond that. “Due to the unavailability of content, VUDU is a constant let down,” says Scherf. “Every now and then my wife and I will go to the VUDU box and think: boy, is there something interesting we can watch? And typically the answer is no.” Scherf prefers the Apple TV as a living room-based entertainment box. “The Apple TV has more functionality than the VUDU box, for sure,” he says. “It can act as a media adapter and talk to your PC and display your photos on the TV and things like that, and those are useful applications for a number of consumers. The music application is significant too. We just put out a press release about our study that shows that more and more people are listening to music (their MP3 collections) on their TVs. Consumers are finding music to be a really nice-to-have feature, the ability to call up their iTunes music collection and play that on their TV. VUDU is really constrained because all it does is allow you to rent movies or download a few movies or TV shows, nothing other than that.” You can tell that Scherf isn’t one of those who accepts the “nobody wants a PC in the living room” argument. He believes there are many advantages to having a PC (or a network router) in the living room. Therefore, it is natural that he would prefer the Apple TV, because, in this category, it is the nearest thing to being a PC. “There are advantages to letting your PC do some of the heavy lifting and storage of other kinds of content,” says Scherf. “Photos and music are two types of content which we believe more and more consumers will want to have access to on various devices and will require that that device talk to your home computer.” While some analysts have interpreted the home networking market as nearly dead, Scherf sees it as just taking a nap. He says that certain types of home networks had actually gotten off to a pretty good start. “If you’re talking about wireless access points or routers, that market has been quite successful; more than 30 million homes have these types of home networks already,” he says. But it’s the next generation of home networks that has been problematic. “We’ve all been waiting for years and years to see this next generation, which will be heavily entertainment-centric, and it hasn’t come to fruition yet.” Scherf doesn’t believe these “alternative set-top boxes” will dominate the movie download market, merely fill a needed gap, which is good, because they will help grow the market. But he doesn’t see them being the be-all and end-all. He thinks the market for Internet video solutions will remain diverse for quite some time with no one platform soon dominating. And he believes the home network will remain an important solution and continue to grow. TiVo/AMAZON UNBOX (or VoD)
It used to be fair to consider a TiVo as merely a cable-centric DVR, but the company has been expanding the capabilities of its boxes and reaching out for new markets. What puts TiVo into this new alternative box category is a package deal for movie downloading called “Amazon Unbox on TiVo,” which it has been offering its purchasers. Subscribers to the Amazon Unbox on Tivo service can either download movies to their PCs and then transfer them to their TiVo via a home network, or they can access Unbox directly from their Internet-connected TiVo. When visiting the Amazon Website directly from their TiVo, shoppers must look for the TiVo logo to find “TiVo-enabled” videos. When shopping via their PC, they must choose their TiVo DVR as a “RemoteLoad download destination.” In July Amazon announced that it will replace its Unbox service with a new service called Amazon Video on Demand. Evan Young, Director of Broadband Services at TiVo assures that the relationship with Amazon is an “ongoing” one and that “the service continues.” He regards Amazon’s new service as being more like an extension of Unbox than a replacement, and he says the change-over will merely require a name change. The new name for the Amazon/TiVo service will likely be: Amazon Video on Demand on TiVo. “When Amazon makes the name change, we’ll be in lock step and make the change as well to avoid confusion,” he says. According to a July 17 article in the New York Times, Amazon Unbox was originally a download-only store, which was “largely seen as a disappointment because it required customers to download special software to watch the programs they bought. The service also worked only on Windows PCs and TiVo set-top boxes.” In contrast, the new Amazon video store will stream content “just like programs on a cable video on-demand service.” This will permit customers to begin viewing a movie or video almost immediately, rather than have to wait for the movie to download. Amazon will be offering over 40,000 movies and television programs from most of the major studios and TV networks. Young says that for now TiVo/Amazon service will remain unchanged, which means that content will remain available for download only (for purchase or rent) and not be streamed, as the content will be through the new Amazon Video on Demand service. Young also points out that the current TiVo/Amazon service uses progressive downloading which allows for nearly immediate playback of content, nearly equivalent to streaming. The pairing of TiVo and Amazon is an interesting one, and it raises the question – is the ideal broadband set-top box a DVR? And could it be the DVR that eventually dominates this market? Stay tuned. To read installments 1-5 of EMedialive's DVD Download Business series, click here.Mark Fritz (markfritz at intergrafix.net) is a freelance writer based in Bloomsburg, Pa., and a contributing editor to EMedialive and Streaming Media.
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