IPTV - The Sky is Falling!

HD camcorders were beautiful and prices were heading in the right direction at NAB. Monitors were gorgeous and prices were heading in the right direction. Post production products … ditto. Storage for products in the works was hard drive based. For the finished product it was …aahh either a flavor of blue or flying through the air.

Amid it all, Chicken Little was running in and out of sessions and pecking all over the floor saying the sky was falling.

He (or was it a she?) was sure Tellywood was dead.

He/she knew that IPTV was taking over broadcasting.

Later it was positive that no one would watch video on anything but their cellphone.

Chicken Little may be having a slightly paranoid anxiety attack.

One thing we know is that the millions of large, high resolution screens (Figure 1) aren't for mobile viewing! Even though the government has said everyone will convert to digital TV in a couple of years, industry analysts project that only 63 percent of the U.S. households will own HDTVs by 2010. Maybe by then the 49 percent of the folks who have the sets but don't actually take full advantage of HDTV what they have to buy (or rent on a monthly basis) to make it work properly!

Today, 50 percent of the U.S. households have cable while only 26 percent have satellite. Then there are the folks who get the service free through the air. Despite the noise level, IPTV is just beginning to gather traction and as always it is with the technically elite who swear they are the majority.

By 2010, the Diffusion Group estimates there will be nearly 191 million cable subscribers worldwide (Figure 2). The cable guy with his two-way communications capability and growing bundle of service offerings isn't sitting around waiting for the acorns to fall !!

There will be an estimated 53 million IPTV subscribers by 2009. Fighting over these subscribers will be hundreds of IPTV networks but only 40 of them will have more than 100,000 subscribers. That means we'll have a lot of niche "channels" and a lot of VC-funded efforts that stumble, crumble and die in the years ahead.

While IPTV is very good for the technologically adventurous, only five percent of the satellite and cable TV customers said they would switch according to a survey by Market and Research. Thirteen percent said probably and 52 percent didn't know. Which meant 35 percent didn't have a clue!

Of course that hasn't stopped backbone suppliers in going to Congress and insisting that they need protection of "their" Internet. What aging governmental officials don't understand - and no service provider is going to tell them is that the Internet is like the cosmos (Figure 3). It is still as the original ARPANET was when it was conceived…a network of networks.

There are a lot of things coming together that make IPTV attractive (Figure 4). Video compression has improved. People like the idea of being their own TV programmers. Convergence is getting here…painfully. And broadband is becoming the norm.

But the most optimism is coming from folks who developed or have invested in the streaming solutions. They are certain that it is just what everyone wants/needs and they are just the people to deliver it.

We couldn't get the time right to record TV shows with our VCR. We can't do it with our PVR (our kids can but…).

The kids watch the shows on their PCs (yes with big monitors) but the family room set is still connected to the cable and connecting the new "converged" solutions is no easy task.

Broadband Internet connectivity is growing rapidly. Iceland, Korea, the Netherlands and Denmark (Figure 5) lead the connected globe with more than 25 subscribers per 100 inhabitants. DSL leads the race in 28 countries while Canadians and Americans are more comfortable with their cables.

If we were VCs with tons of money sitting on Sand Hill Road we'd probably not be spending a lot of time at home but go where the potential was…China, India, Indonesia and countries with significant populations and just the emergence of technology (Figure 6).

But it won't be easy because that convergence we mentioned a little earlier also blurred traditional party lines. TV folks used to do TV. Phone folks handled the three minute calls. Then the Internet emerged and that took a big chunk of action out of the postal service. Next came the mobile phone and suddenly we would pass out if we weren't talking to someone … somewhere!

Just as earbuds have become permanently implanted people are certain that everyone will have to have their video with them…all the time. Sure, it's huge in Japan and Korea. In the U.S. there are already more than three million streaming TV/video content wireless subscribers and they are willing to pay an average of $40 per month to stay in touch with their latest soap.

The highest users? You guessed it people who are 15-24 and have really good eyes! And the people at V Cast, MobiTV and the emerging services are forecasting hockey stick growth that makes VCs salivate and helps industry analysts adjust their forecasts.

Now everyone wants to - and is trying their darndest - to do it all. But baby that ain't easy (Figure 7). Content, devices, access, transport all want their piece of the action. In fact they want their unfair share of the action.

The service providers want the control and the visibility. They want to manage your home network. They want to limit their liability for your home network. They want to minimize their CPE (customer premise equipment) Capex (cost).

In the other corner we have the content providers who are determined to minimize content piracy which is no mean trick considering that it is estimated that $1.06 billion worth of pay TV was stolen in Asia last year!!!!

No wonder they want to maximize their compensation.

Cable - regardless of your view of "the Guy" - has been able to deliver relatively good quality of service (QoS). But we're partial to the Internet cloud even though some of the backbone providers seem to be a little "overzealous" in their new demands. Because there are so many different routes, QoS is excellent. Don't take our word for it, visit www.internettrafficreport.com .

Globally it is damn good and even though AT & T, Global Crossings, Covad and the other pipe owners claim it all because of them. B.S…it's the cloud.

Of course that doesn't stop Foxy Woxy from showing us the shortcut with his digital rights management (DRM). You know the stuff that doesn't work interoperably. The stuff that establishes content usage rules (can you say sharply restricts). The stuff that gives them a solid business model (can you say huge profits).

IPTV is so fresh, beautiful and promising; everyone wants a piece of her.

The IP folks see them being tomorrow's TV network. In all modesty… the ultimate TV and video aggregator.

The computer folks see themselves as playing a pivotal role in the home network. You know a place where you store all of your stuff. Of course connecting that to the TV requires: a) a lot of coordination; b) lots of bucks invested and c) for the foreseeable future either a rocket surgeon or 15 year old in the house to pull it all together.

The networking folks are working both sides of the street. They sell to the computer folks, deliver solutions to the IP people and want to play nice-nice with the service provider.

These dudes are struggling to not just provide the pipe but also some interesting content. Their homes host a lot of the indie content and prosumer stuff you see on the iNet. They not only control the equipment and deployment they are hell-bent to ensure they have tiers of QoS that someone pays for and …they don't care who pays!!!

The numbers (read potential) are tremendous:

• 825.5 million mobile phones sold last year
• 930 million mobile phones will be sold this year
• 41% of mobile phone owners are "interested " in videos
• 3 million plasma TVs sold so far
• 53 million IPTV subscribers by 2009
• HDTV market to reach $65 billion by 2009
• 111 million Internet users in China last year
• 47% of Europeans use the Internet
• PC sales starting to work on its 2nd billion units

That's huge !!!

But keep in mind:

• U.S. population is 300 million
• World population is 6.5 billion
• Total Internet community is over 1 billion or roughly 15 users per 100 folks
• Total PCs out there are about 1 billion or 14 users per 100 people

And you know what they say?

The population is getting older.

Take the U.S. and project the numbers globally (Figure 8). By 2010 about 215.4 million will be ages 55-84 (watching a big screen is OK but a cellphone screen?). About 124.5 million will be 15-24 (great eyes that will go bad staring at the small screens).

The other two segments -- 25-39 and 40-54 -- won't have much time to watch TV…they have to design/build/sell the content enjoyment devices !!!

Maybe Chicken Little is right. We must go tell the king!!!!

Of course in Tellywood he may be a queen !!!