No More Analog Over the Air Broadcasts 2009. Get Ready for Digital TV.

According to the www.dtv2009.gov website:

"At midnight on February 17, 2009, all full-power television stations in the United States will stop broadcasting in analog and switch to 100% digital broadcasting. Digital broadcasting promises to provide a clearer picture and more programming options and will free up airwaves for use by emergency responders."

In order to help consumers, the goverment is providing a TV Convert Box Coupon Program:

"Congress created the TV Converter Box Coupon Program for households wishing to keep using their analog TV sets after February 17, 2009. The Program allows U.S. households to obtain up to two coupons, each worth $40, that can be applied toward the cost of eligible converter boxes.

A TV connected to cable, satellite or other pay TV service does not require a TV converter box from this program.

Consumers have a variety of options. Options to explore include:
1. Keep your existing analog TV and purchase a TV converter box. A converter box plugs into your TV and will keep it working after Feb. 17, 2009, or
2. Connect to cable, satellite or other pay service, or
3. Purchase a television with a digital tuner. "

More information can be found in the DTV 2009 Website.

Can We Profit from This?

I'm still looking at more ways to profit from this trend, but we do know there is a solid trend from Analog to Digital TV.

In a previous blog, we mention a few initial stock options:

1. Corning (GLW) -- Used by Optical Networking and Flat Screen and High Definition HDTVs
   
2. Cisco (CSCO) -- Networking and Set-Top Box exposure.
   
3. NDS Group (NNDS) -- End to end digital technology and services to digital pay-television operators and content providers worldwide.
   
4. Harris Group (HRS) -- Has a Digital TV division and provides emergency communication equipment, broadcast communications and wireless networking.
   

We may revisit this topic some more at a later time.

Do you have any ideas you'd like to share?

Article on: "No Profit Bonanza Likely from TV Cutoff"

The Clear Winner is Blu-Ray, not HD-DVD. The Industry has spoken.

For sometime now, there have been two competing High Definition DVD formats:

1. HD-DVD (backed by companies such as Toshiba and Microsoft (MSFT))
   
2. Blu-Ray (backed by companies such as Sony (SNE))
   

Studios, electronic manufacturers and other companies put their weight behind each format. Consumers were slow to adopt either format because of the format wars.

However, right now, we are starting to see a clear winner.

1. Best Buy is backing Blu-Ray as the High Definition DVD format
   
2. Blockbuster (BBI) has chosen Blu-Ray.
   
3. Netflix (NFLX) will stop supporting HD-DVD in favor of Blu-Ray.
   

Here's part of an email Netflix sent me:

You're receiving this email because you have asked to receive high-definition movies in the HD DVD format. As you may have heard, most of the major movie studios have recently decided to release their high-definition movies exclusively in the Blu-ray format. In order to provide the best selection of high-definition titles for our members, we have decided to go exclusively with Blu-ray as well.

While we will continue to make our current selection of HD DVD titles available to you for the next several months, we will not be adding additional HD DVD titles or reordering replacements.

Toward the end of February, HD DVDs in your Saved Queue will automatically be changed to standard definition DVDs. Then toward the end of this year, all HD DVDs in your Queue will be changed to standard definition DVDs. Don't worry, we will contact you before this happens.

...

We're sorry for any inconvenience. If you have any questions or need further assistance, please call us at 1 (888) 638-3549.

-The Netflix Team

With the winner of the High Definition DVD wars all but chosen, now consumers can move forward and adopt Blu-Ray DVD as the standard. Those consumers who have bought High Definition Televisions can now purchase Blu-Ray DVD players (and Sony's Playstation 3). Consumers who have held back purchasing camcorders waiting for the next generation of High Definition DVDs can now start purchasing Blu-Ray based Camcorders. Consumers can start purchasing Blu-Ray DVDs in larger numbers.

Congratulations to Sony (SNE) who has finally won a major format war, many decades after losing out on the Sony Betamax vs. VHS format war.

Tivo Experience

Not everyone may know about Tivo. But for those people who do have Tivo, they will swear by the product and proclaim that Tivo has truly changed their life.

What is Tivo?

Tivo is the leader and innovator of a category of products called DVRs, Digital Video Recorders. Essentially, a DVR is similar to the old VCR, but shows are saved in a digital format in the DVR's internal hard drive (and with a capacity normally much better than a VHS tape). But the features of DVRs go beyond that.

In the Tivo (which I consider the best of all the DVRs, since I am a user of Tivo), there is a channel guide with program information which is updated on a regular basis. Users of Tivo can select programs through the guide, or they can search for the program. Once they find the program, a user could just press the button to record. No more having to manually set up Start Time, End Time, Channel. (No more Blinking 00:00 time lights either.) You just tell Tivo what program to record (even in the future), and it records it.

Tivo users also have the option to choose to record an entire season called "Season Pass". A Tivo user could select taping all reruns of "Friends", and the system automatically tapes the entire series.

When Tivo users want to watch a program, they simply go through a listing of all taped programs (with proper labels and episode information) and choose which program they wish to watch. They can fast forward to the parts they want, and they can even program a button to skip 30 seconds, very useful for fast forwarding commercials).

When watching Live TV, the Tivo users can even rewind Live TV to replay any part they missed. They can also pause Live TV during a Big Game so you can go to the door and pay the pizza delivery person.

Some Tivo's have a Dual Tuner Feature where you can record two shows in parallel. Tivo Series 3 supports High Definition. (Once you use Tivo Series 3 to record HD programs, you'll realize that you won't want to watch standard definition anymore.)

The Tivo is an easy to use standalone box which doesn't require a PC. The Tivo box is the size of a DVD player, and downloads program information either through a home network (wired, or wireless) or through a dialup phone number. Obviously, Tivo will require a connection to the content (Cable, satellite, or over the air).

Some Tivos even have a DVD writer built in (not Tivo Series 3).

If a Tivo user connects through the PC, that user will be able to access some information on the PC, including displaying photos. This Tivo Server feature will most likely be able to support many value added features similar to a Window Media Server or Apple iTV. You can access some Yahoo (YHOO) functionality from the Tivo interface as well.

Tivo and Amazon have also teamed up with Amazon Unbox. This will allow users of Tivo to purchase shows from Amazon and have them downloaded direct to the Tivo box to be watched later.

With Tivo Series 3, you don't even need a cable box. Typically, with older Tivos, a cable box may be connected to the Tivo. But Tivo Series 3 allows Cable Cards to be inserted into the Tivo instead of a Cable set-top box. The cable card essentially replaces the Set-Top Box (you won't get video on demand, however). This removes clutter from the entertainment system and simplifies things.

Users of Tivo pay a monthly subscription fee. Sometime ago, users were offered a lifetime subscription, but this offer is no longer offered. Some people go to Ebay to buy a Tivo with Lifetime subscription attached.

Tivo's Effect

Tivo and the DVR has truly changed the way people live. Before, people would reschedule their life so they can try to catch their favorite show. A lucky few may have planned in advance and setup their VCR to record a few programs here and there.

But now, Tivo users can live their life without being attached to the broadcast TV schedule. Tivo users can watch what they want, anytime they want. Those who have Tivo never watch Live TV again.

For parents, it can be very helpful too. Parents can tell their children to not watch any television during school nights, and on the weekend, they can watch shows they missed on Tivo.

Tivo users save a lot of time too as they learn to fastforward shows or fast forward commercials.

And Tivo, if you don't need the TivoServer feature, doesn't require a PC. And the Tivo looks to be much easier to setup than a Windows Media Server or even an Apple TV.

Adoption

If Tivo is so good, then why don't more people use it?

Good question and this is a challenge for Tivo (as well as all the players in the Digital Living Room). As I discussed in a previous post, many companies are fighting for market share in the Digital Living Room. One person even wished that some Tivo functionality can be combined with Apple TV (who has a near monopoly with iTunes, and has a deal with YouTube to show YouTube videos.

The industry still has ways to go and may require consolidation and partnership and interoperability. But as my description of Tivo above shows, we are getting closer to a life changing digital living room. Tivo certainly has already changed many peoples lives.

Current HDTV Cycle

Before we look far into the future, let us not forget the current HDTV cycle. People have been adopting HDTV High Definition sets for sometime now.

Current beneficiaries include:
1. GLW -- Corning Glassware
They are involved in Display Technologies.
2. BBY -- Best Buy
Popular Retailer of Electronic equipment including HDTV sets.
3. SNE -- Sony, producer of BluRay products (BluRay is a High Definition DVD)
4. TOSBF -- Toshiba is a maker of more affordable HD-DVD DVD players.
5. NFLX -- Netflix. DVDs by mail company suppotrs BluRay and HD-DVD dvds.

Near term HDTV upgrade cycle:

For those who have experienced HDTV for the first time, you know it is hard to go back to standard definition TV. More and more content will be in High Definition and customers will start to demand it. Those with DVRs will want to be able to play HDTV content (TIVO and Cable and Satellite DVRs have models which support HDTV recordings). People will demand internet video be in high definition video. Consumers will start retiring their old standard definition camcorders for High Definition Camcorders. Consumers will want the Blu-Ray vs. HD-DVD debate to settle down so consumers will be able to finally buy a BluRay or HD-DVD player to enjoy the movies.

There's an HDTV upgrade cycle coming, and let us pay attention to this trend.

No More Analog TV Broadcasts in 2009

Did you know that by 2009, there will be No More Analog TV Broadcasts?

Can you imagine a world where people can no longer can get over the air analog TV broadcasts? This may mean a service disruption to many people with older Analog Sets. Cable companies may convert the digital signals back into analog for those with older sets. There is also a program where government subsidizes the purchase of special set-top boxes.

I see some investment opportunities in the future. People have been moving to HDTV some time, and for all those who have not upgraded, the 2009 deadline could help spur people to upgrade to HDTV.

Also, companies may use this opportunity to offer their "Digital Living Room" set-top box/computer at an inexpensive price. Companies may view this as an opportunity to get market share and lock in their customers.

But the changes will still be several years away. Let us look at this issue as 2009 gets closer.

Losers of the Digital Living Room Revolution

There will be losers in the Digital Living Room Revolution.

1. LOSER: DVD retailers (even HD-DVD or Blu-Ray?):

REASON: Video on Demand may become so prevalent, people will choose to download movies instead of drive to their neighborhood Blockbuster, or even to their mailbox to pick up movies from Netflix. Even DVR maker Tivo (NASDAQ: TIVO) has a current system with Amazon to download shows directly to the Tivo box.

TIME FRAME: I think Netflix (NFLX) is still viable at this time, and maybe Netflix may still be viable because they can mail HD-DVD and BluRay DVDs. Video on Demand is still in the innovation and early growth stages and will need much greater adoption before DVDs become obsolete.

2. LOSER: Gaming Retailers such as Gamestop (GME)

REASON: Eventually, there will be Gaming on Demand where customers can directly download Games without having to go to a retailer. Companies might even come up with Gaming Servers where customers can log on to the site, and play their game at home.

TIME FRAME: It will be a while before Gaming on Demand becomes big enough to be a big threat to Gaming Retailers such as Gamestop (GME). Since we are still at the beginning of the Gaming cycle (3 major consoles out), I'd buy Gamestop but carefully watch the developments in Gaming on Demand. (author holds: GME)

3. LOSER: Traditional Broadcasters

REASON: As IP Protocol TV (IPTV) becomes more prevalent, broadcast and cable channels will have less drawing power. There will be much more selection and many more choices for the average consumer.

TIME FRAME: We are still very early in this cycle. We are in the innovation stage. However, even traditional browser based entertainment/videos, games are reducing the time people spend watching traditional Broadcasters.

4. LOSER: Traditional Advertisers

REASON: As people adopt DVRs and Tivos in much larger numbers, the power of the traditional advertiser goes down. With DVRs, people can easily forward commercials. TIVO and DVR users usually gush over the technology and it truly changes the viewing habits of those who use it.

TIME FRAME: DVRs and Tivo (TIVO) are being adopted in greater numbers (though not as fast as the adoption of the VCR?). By 2010, it is said that 30% of US households will adopt it.

5. LOSER: Traditional Desktop PC manufacturers?

REASON: As the Digital Living Room becomes more advanced, and as more internet activity moves towards the digital living room, less people may be using their Desktop PC. Digital Living Room Devices such as Tivo (that sit between an HDTV set and the broadband connection) can interact, but do not require the Desktop PC. The nature of these Digital Living Room Device (such as Tivo or a set-top Box or AppleTV) does not necessarily have to be the traditional Microsoft (MSFT) or Apple (AAPL) Desktop PC.

More losers may exist but the above should hopefully give us an idea what may be in store for certain businesses. Those in danger of obsolescence have to act now or they may end up being the dinosaur of the technology world.

Which Direction will the Digital Living Room Revolution take?

When we compare the vision of the Digital Living Room Revolution, and the current implementations right now, we see that there is potential here today. However, which direction will industry take?

As my previous post on the Current Contenders shows, there are many different ways companies are playing the current Digital Living Room. There does not seem to be any convergence, and each company is creating a proprietary system. Tivo has a proprietary system (so they can earn monthly subscription fees). Comcast DVR set-top boxes have a proprietary system. According to a CNET article, Gartner analyst Van Baker says that electronic companies are trying to lock consumers into using their proprietary technologies so they can charge a premium for their products.

Is this the wave of the future, where many companies are pushing proprietary systems competing for their share of the pie? Will there be a true winner in the end and will consumers adopt the technology in large numbers? Or will there be a move towards open standards, interoperability and convergence?

If there are open standards and interoperability, I can imagine the equivalent of a Computer sitting between the service provider, and the HDTV set, while being part of a home network. This computer-like device should be very easy to use and install, have an easy to user interface, and have all the computer like components such as internal hard drives, USB connections, wireless connection, wireless keyboard and remote device, an operating system, and the ability to run third party applications. This device should be able to interoperate will different service providers (Cable, Fiber, DSL companies), different HDTV sets, interact with different types of PCs in the Home Network (Apple or Microsoft PC), and be able to run third party applications. The system should be modular and accept external hard drives and other devices, much like the current PC.

But what direction will industry take? Apple (AAPL) seems to have been very successful with making their system a closed system with iTunes and iPods. Why would a company with a very dominant position using the closed system model want to adopt the open model?

We are in the very early stages of the Digital Living Room. These are exciting times, and I am very interested which direction industry will take. What will industry do next?

The Digital Living Room Revolution

In Cody Willard's Blog, he mentions that there is great "secular growth in the browser-based Internet-video cycle [as it] accelerates over the next few years. " While I agree with Cody Willard in this, I think this is only going to be part of a much larger scale Revolution: The Digital Living Room Revolution.

Viewing videos using traditional Internet Browsers (Internet Explorer, Firefox) is great. I can easily imagine a teenager sitting in front of their PC or workstation (or maybe in an Internet Cafe) going to YouTube and browsing videos and user generated content.

However, I think there are limits. I don't see grandparents regularly going to YouTube and browsing content. I don't see families sitting together enjoying YouTube. (Nielsen ratings says that there are more men than women who use YouTube, and those 12-17 years old are the key demographic.) Even if movies are streamed and viewed using an Internet Browser, I don't think many people would want to sit in front of their PC watching a 2 hour movie.

To reach a much wider audience, and to achieve a true widespread, paradigm shifting Revolution, the interface has to change. I believe the Revolution will be centered around the Digital Living Room.

I can imagine a future with the Digital Living Room (includes HDTV sets, a good sound system, and a very easy to use computer-like interface to the internet):

1. No longer will people be restricted to Cable Channels or Broadcast Television. Users or new companies can generate new content and videos and stream these directly to a family sitting on their couch watching their HDTV set. I can imagine a user using a simple remote interface (a modification of the Nintendo Wii's interface?) to change IP channels in the same way as a user today would change channels on a regular TV.

2. DVD players (even Blu-Ray or HD-DVD) becomes obsolete as video on demand gains wide acceptance. People can watch any program they want anytime they want without having to go to the video store.

3. Stores selling games for Game Consoles such as the Playstation PS3 becomes obsolete as gamers can download games directly to their system.

4. Instead of using the telephone, users can communicate with each other directly in high definition video calls.

5. Instead of having simple email, people can have video emails in High Definition.

6. The nature of retailing changes as people can evaluate and buy items with the aid of High Definition videos. Since the interface is easy to use and accessible to a wide audience, many more people would be able to buy items through the internet.

7. New developers could develop value added applications such as having a streaming ESPN sports ticker while watching their favorite sitcom on another channel.

These are just a few examples of the Digital Living Room. While there are some hints of this technology at this present time, there are many steps before this vision can take place.

In my next few posts, I intend to explore the current state of todays Digital Living Room and speculate what might happen in the future.