CONNECTIONS™ Summit at CES to examine business strategies, opportunities for advanced digital solutions

Speaker submissions accepted through September 12

Parks Associates and CEA® announced the session topics for the upcoming CONNECTIONS™ Summit at CES, which will focus on business strategies, opportunities, and challenges for advanced technology, new media, and new access services.

CONNECTIONS™ Summit at CES will address the new business and product opportunities inherent in the increasing connectivity of today’s market.

Session topics include the following:

• Consumer Purchase Habits
• Advanced Video Services
• Digital Home Customer Support
• Social Media
• The GPS Market
• Connected Consumer Electronics
• Digital Photo Frames
• Connected Gaming and Game Consoles
• Digital TV and Set-Top Boxes
• Home Systems and Controls

Parks Associates is currently accepting speaker submissions for CONNECTIONS™ Summit at CES at http://www.parksassociates.com/events/connections/summit/2009/agenda/index.htm . The deadline is September 12, 2008.

In addition, Parks Associates will feature its latest consumer research projects in Booth #25556, South Hall 2 during the CES International event.

The full press release is available at: http://www.parksassociates.com/events/connections/summit/2009/media/pr5.htm

Is the Fancast Store a Mistake?

In the age of online entertainment, consumers get virtually unlimited choice of content and unlimited means to entertain themselves. They can stream their favorite episode of Lost from ABC.com, watch full-length movies on Hulu or even download episodes of shows like the The Office from NBCDirect and they can do it all for free.

These choices offer consumers unprecedented amount of control over their entertainment experience, which is bad news for incumbent content aggregators: cable, satellite and IPTV companies. The incumbents have to create a way to deliver increasingly-sophisticated entertainment to consumers for free.

Amy Banse, the president of Comcast Interactive Media, alluded to some of thesechallenges during her keynote at the Parks Associates CONNECTIONS™ event in July (http://parksassociates.com/events/connections/2008/attendees/materials.htm).

Comcast is a great example of an incumbent provider working hard at establishing new entertainment avenues for consumers. In 2006, it launched Ziddio, a user-generated portal similar to YouTube. It followed up with FearNET.com, a horror movie and community site. In 2008, it launched Fancast, a video aggregation and streaming site.

Not all its experiments have been a success. In August, Ziddio has closed its doors (or shut down its servers) for good. FearNET, on the other hand, is alive and growing. In 2007, Comcast expanded it onto the video-on-demand (VoD) platform. This is a critical step for Comcast, as it is trying to build a holistic consumer experience, linking TV, internet and mobile into one.

Comcast’s latest foray into the digital media distribution is the launch of it’s Fancast store in September of 2008. Using the store, any broadband customer in the US can download from over 3,000 titles. Comcast plans to expand the library to 10,000 by the end of 2008. With the new store, users will have an option to buy or rent the video and download it to their PC at prices comparable to Amazons: $10-15 to buy and $4 to rent.

This latest expansion makes me pause to think about what Comcast is trying to accomplish. Have they not learned from iTunes, Hulu and Veoh? What about Netflix and Walmart, who got their own bruises trying to set up digital distribution?

Without a doubt, Comcast will face many of the same challenges as distributors listed above, however, in Comcast’s case, there are significant benefits that would make this strategy worth the risk and give Comcast a chance to succeed. Let’s take a look at each in greater detail. First, let’s consider the challenges:

• Unfavorable economics. Same argument as applied to Hulu and Veoh and Joost applies to Comcast: content owners keep the bulk of the video advertising revenue. Although Comcast did not comment on the revenue arrangements, it did admit that content owners sell ads in the videos featured on Fancast, which usually means that content owner retains 70-90% of the revenue. With the launch of the Fancast store, Comcast acquires an additional revenue source: consumer purchase and rental fees, however, it is also likely that content owners keep the bulk of those.

• Digital rights ruin consumer experience. Content owners manage media rights very carefully, to ensure revenue maximization. This would hinder the delivery of the holistic consumer experience mentioned above. For example, a movie, or a TV episode may be available on Fancast site, but not available on VoD. Additionally, content owners are adamant about protecting their content with the Digital Rights Management (DRM) software. Fancast is no exception, using Windows Media DRM. DRM further restricts how viewers can enjoy video, for example, consumers can only watch video on a PC, not a Mac, mobile device or a TV. Such limitations also interfere with “for pay” business models outlined above. Rather than downloading a heavily-protected video file that can only be watched on a PC, consumers will opt to buy (or rent) a DVD, which can be watched on TV or PC and now even on a mobile device as some DVDs include digital versions.

• Competition will hinder success. Online video field is extremely hot with many hands reaching for very little revenue. From the broadcast networks to the device manufacturers, companies like ABC, NBC, Apple, and Microsoft are all striving to deliver the next generation of the consumer entertainment experience. Standing out in this crowd will require an exceptional product with clear differentiation.

There are, however, opportunities for Comcast in pursuing this strategy:

• Content owners crave secure, multi-platform distribution. As consumers increasingly engage in concurrent media consumption and ad avoidance, the effectiveness of advertising in media decreases. Advertising revenues pose the bulk of revenue for many content owners and they want to ensure that if effectiveness of one channel, such as TV, diminishes, they have another channel, such as internet to supplant it with. Service providers such as Comcast make very good partners for media companies, potentially yielding better revenue splits and more lenient distribution rights.

According to Alix Cottrell, general manager of Fancast, this is the route that Comcast intends to follow. Current plans will allow Comcast customers with VoD or DVR to either copy online content into their VoD folder or have it recorded on their DVR (if the show is only available on linear TV). Comcast plans to implement this service within 12 months. In the next 24-48 months, Fancast also plans to launch a mobile component. Initially, consumers will still have to download content to PC and then port it to a mobile device. If the Clearwire partnership is successful, however, Comcast may also launch a direct-to-device service on par with at&t’s Mediaflo or Verizon’s VCAST. Finally, thePlatform, Comcast’s video delivery arm, has recently acquired Chirp, a social application developer, suggesting that Comcast is gearing to dramatically expand social features of its Fancast service.

• Can build biggest libraries. As a media aggregator and distributor, it is easier for Comcast (and most service providers) to build large video libraries. It can leverage its linear distribution relationships to secure content from many providers. It is also not bound by the media ownership regulations that restrict some of the other aggregators. For example, Hulu still doesn’t have ABC’s and CBS’ content in its libraries and it likely never will. Even if the ideological differences between partners get resolved, media ownership regulations will preclude Hulu from adding more content partners.

So does Comcast’s launch of the Fancast store make sense? Will the store succeed? I think it’s safe to say that it does and it will. Of course it is important to keep in mind that success will NOT be measured by revenue or profitability of an individual property like Fancast. Fancast will, however, condition consumers to seek video online and will also build stronger links in consumers’ minds between internet video and traditional TV. As content owners relax their rights requirements, Comcast will be in the position to deliver the holistic consumer experience, which envelops consumers in content (and advertising) regardless of where they are or which device they are using. That service may even be compelling enough for consumers to consider opening their wallets!

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Written by Anton Denissov, Research Analyst, Parks Associates

THE EVOLUTIONS OF VIDEO DEVICES - session recap

Kurt Scherf opened the session by discussing how multi-platform video experiences are not a reality today. When consumers access Internet video services, for example, they are overwhelmingly accessing content only on the PC, and very few are using TVs and portable multimedia players (PMPs). Only 5% of Internet video viewers watch their video on a PMP, not a highly successful platform.

From Parks Associates’ TV 2.0: The Consumer Perspective consumer research study, multi-room access to content in the form of whole-house DVR applications is a feature of growing importance. Parks’ research indicates that operators who deploy multi-room DVR will be in a better position to acquire customers from other service providers who are not offering such a solution. Also, Internet video services are struggling to attract a substantial base of paying customers. However, making video accessible at the television will change this dynamic considerably. Scherf said that connected consumer electronics platforms – including game consoles, televisions, DVD players, and others will contribute to growing revenues for Internet video services.

The panelists then had a chance to introduce themselvess:

Richard Bullwinkle, Chief Evangelist, Macrovision - DLNA is important – to address TV to Internet connectivity. Hard drive in the home is a waste of energy, etc. Content in the cloud is the future, once rights are addressed, as content companies are better archivers of their content. Future of their business: 1) metadata provider, 2) guidance which is social network related (widgets and recommendations), 3) technology in the form of DLNA toolkit.

Bernhard von Canstein, Director, Europe, Qualcomm - Most transmission is point to point, which does not serve video – therefore they developed MediaFLO. MediaFLO provides the full end to end ecosystem in the US. Live streaming video and clipcasting provided. MediaFLO up and running in the US but just now entering Europe. FLO Forum is driving standardization worldwide.

Laurent Jabiol, CEO, NEOTION - Neotion is a French company. They are focused on bringing premium content services directly to the television. Pay TV providers struggle with high infrastructure costs to deploy customer premise equipment such as set-top boxes. Enabling televisions to receive IP services is a cost-effective way to enable new services in the living rooms. Netion’s solution takes European standards such as DVB-CI and CI+ and creates CI modules that televisions can accept to receive premium services. These modules allow televisions to perform a variety of functions, including DVR, multi-room streaming, and support high-quality video experiences (MPEG-4 and high-definition content).

John LeMoncheck, Co-Founder, Wireless HD and SiBeam - SiBeam’s solution enables the wireless transmission of gigabits of data – enough for uncompressed HD signals in the home. Back channel enables wireless connectivity to other devices, such as iPod, digital camera, STB, etc. The 60GHz band is a new spectrum capable of very high output. SiBeam formed WirelessHD forum to unite early chip and TV set players. DHCP is the method of content protection, now approved by Hollywood.

Eugen Pfumfel, Toshiba Europe - Toshiba develops system-on-chip (SoC) solutions that enable consumer electronics platforms to become video platforms. Their SoC solutions are aimed at mobile television, digital television, and high-definition offerings. Toshiba’s solutions support MPEG-4 decoding, pixel improvement, and connectivity (wired and wireless).

In the Q&A, Scherf asked the panelists about the use cases for video devices that would exhibit strong early growth.

Richard Bulwinkle commented that the products that delight the customer will be the ones that will be sold. He noted that success will come from understanding the use cases, and particularly those that provide for greater consumer personalization of the video experience.

Laurent Jabiol from Neotion agreed, indicating that devices that offer options, flexibility and provide user control will win.

John LeMoncheck said that a key to video products was to ensure that any new features – such as wireless connectivity – don’t degrade the primary focus of the device – like being a good TV. Therefore, TV manufacturers have been very reluctant to add new features that will have to support.

Bernhard von Canstein indicated that the importance of mobile TV was to prevent churn, and that it would be important for mobile TV services to blend more seamlessly with wireline based services to provide more of an integrated experience. This means that user interface consistency will be a very important feature of multi-screen television services.

Kurt asked if there will be many wireless HD sets in them? SiBeam says many radios will coexist in the TV.

Kurt asked if the future home will have thick clients, or many thin, and what is the future for STBs? Richard Bulwinkle indicated that the answer is going to vary from one region to another. The Asian entertainment experience, he noted, is very personal and much more reliant on mobile devices than in other parts of the world. For some consumers, the mobile phone will be the only entertainment platform. Many different types of devices throughout the home – room for many to play together.

Laurent Jabiol from Neotion said that it was important to keep the television as front-and-center of the entertainment experience. He noted that deviations from this vision, including the Media Center PC/living room PC have failed because the living room is not the right place for a PC. Eugen Pfumfel from Toshiba indicated that the game console or PC both will entertain in other rooms.

Session Review -- VISUAL NETWORKING - THE EVOLUTION OF SOCIAL NETWORKS

Stuart Sikes began the presentation with background information. Visual networking is the concept of social networking converging with video services. These could be across all three screens – the PC, the TV, and the mobile phone. Sikes said that consumer trends point to the blending of social networking and video applications. First, active users of social networks in the U.S. has grown significantly. He presented data from Parks Associates’ Digital Media Habits I and II surveys that indicates that U.S. broadband users who actively use social networks has grown from 27% in 2006 to 40% in 2007.

Social networking can be an important aspect to viral marketing of content – movies, music, and TV shows. People rely on friends and family recommendations significantly for being connected to new sources of content and entertainment. Commercials are the number one source for how people discover content, but the personal recommendations are going to be critical. This will be important for TV service providers as they evolve their electronic program guides to include personal recommendations.

Finally, our TV 2.0 study reveals that visual social networking features – such as the ability to share DVR content with friends and see “most-watched” lists – are important community aspects of the media experience.

Udo Biro, Nokia Siemens Networks - The title of his presentation is “Rich Media Experience: Interest is High … but Evolution is Best.” Rich services expand far beyond traditional TV to meet end consumer demands. NSN is looking at three key elements: Personalization – Basic TV with EPG, VoD, Premium Channels, PVR; Interactivity – Internet on TV; and Community – targeted advertising, connected home (link PC to TV), rich media experience (converged TV solutions – TV, PC, and mobile phones). Consumers are going through a learning curve. NSN is testing chatting over TV. People are interested in the basic things, but it requires and evolution. NSN focusing on rich media experience – anytime, anywhere, on any device. On the Move: Seamless mobile TV (unicast & DVB-H broadcast service convergence) and interactivity and advertising. At home: High-definition IPTV offering a personal TV experience and basic interactive services including voting, betting, and advertising. In consumer tests, PVR and time-shifting viewed as most popular. Basic things are more interesting first, then community services like chat or UGC become interesting. It needs some time to develop. “We need to walk before we run.” Unified and consistent look and feel across devices is very important. Down the road, there will be cross-device interaction.

Stefan Jenzowsky, MoreTV - They offer “smartPVR” services: premium EPG; recommendation engines for PVRs and STBs; remote recordings; and recording assistants; recommendation service trial (since 12/2007) includes the following: viewer profiling, automatic recording; assisted zapping, targeted advertising; and next-generation media recommendation engine based on viewer profiling and collaborative filtering algorithms. Community TV includes buddy recommendations and buddy recordings (up to seven friends and family members can receive these – different laws than in the U.S.). TiVo is probably the closest company to MoreTV. MoreTV is in 250,000 devices – more than Deutsche Telekom has in Germany right now. MoreTV service portfolio includes the following: Smart PVR/Premium EPG; WebTV (“YouTube on the TV”); and Filter Functions. Their roadmap encompasses targeted advertising, sports betting, network-based PVR (nPVR) and virtual PVR (vPVR), community-based TV (recommendations and chat) – believe that recommendations is more important than chatting.

Alx Klive, WorldTV.com - WorldTV.com is a consumer-facing site. It gives consumers tools that were once only available to broadcasters – allow people to create their own TV station including high-definition and full-screen. There are worldwide users in 162 countries. People can be “content curators” in addition to content creators. Additionally, people can pull in content from YouTube. Music and comedy channels are popular, as well as political channels. Two kinds of channels – personal tastes and people trying to replicate the broadcast TV experience. You can pull video in using a Webcam, so people can introduce things like music videos. Partnership with a company called Qik (a live streaming tool) – can send out video to mobile phones. Interesting insights include the following: 70% of people under the age of 24 would like to be able to watch Internet content on their TV; and people don’t want to have just one option for Internet video – not just YouTube. It can’t be a walled garden and needs to be open.

Ashley Norris, Shiny Media - Shiny Media is the UK’s biggest blog network. It is a consultant for digital agency Shiny Red. Currently working on a video-based start-up. They have been successful in building a brand. If you look at the history of online TV, what we had at the beginning was the viral stuff from YouTube, which is throwaway. Then, the BBC iPlayer is a very different experience – a high-quality experience. Shiny has been successful in creating media for an online audience. Beyond an interactive television includes: generation Y (16-24 years old); significant growth of viewers surfing while watching TV/online video and 50% are doing this; integration of communication tools within video players; and development of live streaming tools such as Qik and Kyte.

Fernando Gil de Bernabé, Cisco - Cisco's eight principles for the near future include:

1. Most video content will be streamed – important for getting video to any device, including mobile
2. The combination of video and Web 2.0 will create a new medium; visual networking. We haven’t really seen the possibilities of how visual networking could impact things like watching sports. Sharing and chatting with other people. Uploading content. Entertainment, education, healthcare all can be impacted. This is more than just “interactive TV.”
3. Content will increasingly “find you.” Why can’t system be customized to recommend videos based on past searches or experience? The best way to guess what you are going to watch next is to look at the behaviors of people who have watched similar videos. What do they do next? This will be instrumental in building an engine that will help navigate through the massive amounts of content on the Web.
4. Advertising will be targeted and personalized. If advertising could know who you are and your activities, maybe more people will watch it.
5. Expectations on broadband quality will increase.
6. Fiber or upgraded cable to the masses. People will start demanding this as they see what extremely high-speed networks can deliver in terms of quality and quantity.
7. “Web on the go”: contextuality of people, time and place will drive the next wave. People will want to have the same utility that they have in front of their PCs.
8. Quality of experience will earn consumer loyalty. How can service providers compete with “over-the-top” eating their lunch? Why can’t telcos brand themselves better in terms of the quality experience?

A New User Experience includes video characteristics (High-definition, Multiple screens, On demand, Immersive/emotional) and social networking characteristics (Communities of content, Communities of people, Personalization, Discovery). 50% of the traffic on the Internet in Europe is video. 60% of all Internet traffic will be video by 2011. Convergence of video and social networking becomes “visual networking.”

Questions:

Q. When you mention YouTube on the TV…at what point does the operator become the party that gets sued because of copyright infringement?

A. Since WorldTV is merely bookmarking YouTube, they are not hosting the content themselves, so they stay out of trouble.

Q. Are there opportunities for non-traditional players in providing targeted advertising solutions?

A1. There will likely be collaboration, and different players will have roles in targeted VoD advertising.

A2. MoreTV has indications that post-roll advertising may have a role.

Q. Will the consumer pay directly for these visual networking features?

A1 MoreTV: just introduced a most-watched top 10 list. They charge 5 Euros per month for this feature.

A2 Fernando: consumer and telehealth presence. People have proven time and time again that they’re willing to pay for high-quality communications. There will be a combination of user-paid and ad-supported models.

A3 Udo, NSN: if the operator can deliver the seamless and consistent experience across the multiple screens, there is a branding value. Operators can avoid churn – that’s hidden revenue that can be realized.

A4 Ashley, Shiny TV: on the Internet, monetization will be about advertising. Pre-rolls and contextual based advertising. What we’ll see more of is product placement like what Bebo is doing. In terms of televisions moving to connectivity, this could be a huge opportunity. If you can take Internet-like services where people are more likely to pay, then there might be opportunities for monetization.

RETAILERS & TECH SUPPORT FOR THE DIGITAL HOME - Session Abstract

Kurt Scherf sat down with Anthony Rodio, the chief operating officer for support.com for a conversation about how remote support services can complement retailers’ core consumer electronics sales business. Retailers, Scherf notes, are being called upon in growing numbers to provide advice and support to their customers as the consumer electronics purchase process is becoming more complicated. The complexity of consumer electronics products – and in particular home networking equipment – can be a drain on the bottom line. Scherf noted that retailers and home networking equipment vendors still report high return rates for products such as wireless networks (about 30%), even though analysis shows that the vast majority of returned products have no defect at all!

There is a significant opportunity to add support features on top of a consumer electronics sale, said Scherf. Data from Parks Associates’ surveys indicates that high percentages of consumers purchase extended warranties for CE devices such as home computers. There are also significant percentages of consumers who purchase installation and configuration services when they purchase consumer electronics.

Support.com came out of SupportSoft, a company that develops support software and solutions for service providers. Anthony Rodio indicated that support.com’s launch was aided by consumer data from Parks Associates’ 2006 consumer survey Managing the Digital Home: Installation and Support Services. This study indicated to support.com that consumers are willing to pay for a variety of support services, including remote support for their home computers and home networks.

The market for support services is about to grow significantly, Rodio said, as evidenced by what large U.S. retailers like Best Buy and Circuit City have established. Geek Squad earned $2 billion in 2007, which has given many international retailers impetus for examining their own support businesses. Support.com is working with Saturn and Tech Guys, which are large European retailers. The company works with retailers to allow them to brand their services.

Rodio says that working with both service providers and retailers provides some interesting insight into the differences between how these entities deploy and market support services. He indicates that retailers have a marketing advantage for support services, as service providers often have a difficult time charging for their support services. The opportunity is significant for retailers, he noted, as they can not only deploy remote support services to generate profit, but also to eventually reduce truck rolls. Rodio says that the remote support aspect of home IT support services will be critical, as retailers cannot sustain profitability with a large amount of truck roll services.

In terms of major differences in deploying remote support services in the U.S. versus Europe, Rodio says that supporting customers from multiple countries and different languages is a key challenge. He also notes that labor laws and a culture that is less PC-centric than the U.S. will also mean a different approach in Europe.