What is Holding Up Blu-Ray Adoption?

It's hard to know precisely what message consumers are sending about HD DVD players these days. There no longer is a

format war, as Blu-ray has won its fight with HD DVD. But sales haven't exploded.

In fact, a recent Harris Interactive poll suggests that 93 percent of Americans are not likely to buy a Blu-ray player within the next year, up from the 91 percent who said last year that they were not likely to buy one.

But what that means isn't clear, yet, for several reasons. Popular consumer electronics adoption never seems to hit an inflection point until about 10 percent penetration of households.

About seven percent of U.S. households may already own a Blu-ray device, so we would be, by historical standards, about three percentage points away from any serious test of Blu-ray demand. Price points for both players and physical media seem high, by historical standards, as well.

In the past, no consumer innovation seems to take off until retail prices for devices get to about $300. So far, Blu-ray has failed to hit those levels, and some of us would therefore not expect much change in the adoption curve until that price point is reached.

Many speculate that a shift to digital media also is playing a part in depressing initial demand. It could be that consumers are using more pay-per-view methods or downloading to satisfy some needs Blu-ray was intended to address.

But it also is possible that consumers are wary of buying into yet one more playback technology when they've already been through VHS and DVD physical media. Some may simply be unwilling to shift to yet another format, despite the advantages.

Some 83 percent of U.S. homes own DVD players, and consumers might simply be signaling that image and sound quality is "good enough" on those DVD players, for the intended purposes. Consumers might also be waiting to buy Blu-ray as a replacement device, when their current DVD players stop working.

Whatever the reasons, Blu-ray is in a slowish adoption mode at the moment. Precisely why is hard to determine, as there are any number of reasons why an adoption tipping point has not been reached.

Online Video Viewing Up 49%, Nielsen Online Says

People who watch online video spent 49 percent more time doing so in May 2009, compared to May 2009, says Nielsen Online. The "average" viewer watched 189 minutes of video during the month.

Unique viewers grew 13 percent over the same period, while total streams viewed grew 35 percent and streams per viewer also grew 20 percent.

None of that would surprise anybody.

http://www.nielsen-online.com/pr/pr_090615.pdf

U.K. Officials Expect 10 to 100 Times Digital Content Growth in 3 to 5 Years

U.K. officials believe the volume of digital content used by consumers will increase 10 times to 100 times over the next three to five years.

So officials at the Department for Business, Innovation and Skills and the Department for Culture, Media and Sport have proposed an interim goal of 2 Mbps connections to all U.K. residences by 2012, and also propose a new tax of 50 pence per month on all fixed copper lines to fund the next generation of access networks.

The "Digital Britain" report suggests the funds raised by the tax will be available to fund construction to the one third of U.K. homes that are unlikely to get next-generation access because costs are too high.

"We are at a tipping point in relation to the online world," the report says. "It is moving from conferring advantage on those who are in it to conferring active disadvantage on those who are without."

The report also notes that the broadband "problem" has a few sources, not just "access." Though availability is an issue, affordability, ability to use the Internet and PCs, as well as the perceived relevance of broadband all are issues.

Building facilities addresses one of the problems. The others are more difficult, ranging from disinterest to the price of service. Ofcom, the U.K. communications regulator, points out in a recent survey of its own that 42 percent of U.K. residents say they would not use broadband even if the service were provided free, and they also got a free PC to use.

BT Wants to Charge YouTube, Hulu, Others for Access

BT has publicly said it hopes to charge content owners for delivery of their programs over its broadband access network.

The issue has been circling around the industry for several years, and perhaps the major reasons it has not yet occurred is end user resistance, the fear that some competitors will gain share at the expense of ISPs who do charge content providers for access or other competitive responses by content owners. But the problem is very real.

A text message might consume just 140 bytes. A three-minute voice call might consume 1,800 bytes, an order of magnitude (10 times) more bandwidth than a text message.

A three-minute PC video clip might represent 33,750 bytes, another order of magnitude increase (100 times more than a text message).

A two-hour standard definition movie might represent 3.6 million bytes, an increase of five orders of magnitude (10,000 times more bandwidth than a text message).

And that's the problem. Video imposes loads far beyond anything networks have been expected to handle so far. Engineering a network for text or voice is one thing. Engineering it to handle video is something else again.

"We can't give the content providers a completely free ride and continue to give customers the service they want at the price they expect," says John Petter, BT Retail managing director.

Broadband providers such as Tiscali have been complaining for two years about the burden placed on their network by bandwidth-hungry video services.

BT says the trade-off could be quality of service guarantees for content providers.

To be sure, the issue of how to match the cost and revenue associated with broadband access is bedeviling. Consumption is growing while revenue per gigabyte is falling. Sooner or later the demand and revenue curves will converge, at which point the business model is destroyed.

Without changes in user behavior or pricing, the only question is how it takes before the converge point is reached.

European regulators also have been much more active than their North American counterparts in the area of compelling Internet service providers to assist in curbing content piracy. So it might not be surprising that BT is among the first European ISPs to publicly suggest matching video consumption with access fees.

The logic there is analogous to proposals some have made about pricing email to curb spam. Even slight charges "per message" are enough to destroy spam economics. Perhaps the same would prove true for charges to view content, one might suggest.

http://www.ft.com/cms/s/0/1c979154-5621-11de-ab7e-00144feabdc0.html?ftcamp=rss&nclick_check=1

Video Will Be 90% of Consumer IP Traffic in 2013

By 2013, annual global IP traffic--driven principally by video--will grow more than 500 percent from current levels, Cisco now estimates. ideo. In 2013, the Internet will be nearly four times larger than it is in 2009. By year-end 2013, the equivalent of 10 billion DVDs will cross the Internet each month.

Cisco forecasts that 90 percent of consumer IP traffic, a majority of total IP traffic, will be video in 2013.

In 2013, Internet video will be nearly 700 times the U.S. Internet backbone in 2000.

Also, video communications traffic growth is accelerating. Though still a small fraction of overall Internet traffic, video over instant messaging and video calling are experiencing high growth. As a result, video communications traffic will increase tenfold from 2008 to 2013, Cisco says.

Real-time video is growing in importance. By 2013, Internet TV will be over four percent of consumer Internet traffic, and ambient video will be eight percent of consumer Internet traffic.

Live TV also has gained substantial ground in the past few years. Globally, P2P TV is now slightly over seven percent of overall P2P traffic at over 200 petabytes per month.

Video-on-demand traffic will double every two years through 2013, with consumer IPTV and CATV traffic growing at a 53 percent CAGR between 2008 and 2013, compared to a CAGR of 40 percent for consumer Internet traffic.

Cisco also predicts that mobile data traffic will also be overtaken by video, reaching 64 percent of total mobile IP traffic by 2013.

Cisco expects mobile video to grow from 33 petabytes a month in 2008 to 2,184 petabytes (or 2 exabytes) a month in 2013, which represents a 131 percent compound annual growth rate.

Peer-to-peer is growing in volume, but declining as a percentage of overall IP traffic, Cisco says. P2P file-sharing networks are now carrying 3.3 exabytes per month and will continue to grow at a moderate pace with a compound average growth rate of 18 percent from 2008 to 2013.

Other means of file sharing, such as one-click file hosting, will grow rapidly at a CAGR of 58 percent and will reach 3.2 exabytes per month in 2013.

Despite this growth, P2P as a percentage of consumer Internet traffic will drop to 20 percent of consumer Internet traffic by 2013, down from 50 percent at the end of 2008.

$13 Billion Mobile Apps to be Sold in 2013

Mobile Internet access will see significant gains over the next five years, with the number of mobile Internet users reaching 134 million in 2013, says  eMarketer. By 2013, Informa predicts smartphones will make up 38% of all handset sales worldwide, more than double their share in 2009.

And means growth is use of mobile applications. Analysts at Piper Jaffray estimate that combined spending on consumer and business mobile applications will top $13 billion worldwide by 2012, a nearly fivefold increase over 2009.

Since advertising and marketing efforts likewise ultimately follow people to where they are and what they are doing, “it is increasingly evident that for many marketers, mobile applications constitute a necessary avenue for reaching and engaging with their customers, either by building and marketing a proprietary application or sponsoring a third-party app,” says Noah Elkin, eMarketer senior analyst.

http://www.emarketer.com/Article.aspx?R=1007124

Video Consumption Climbs on All Screens

Online video consumption grew 13 percent in the first quarter while mobile video viewing grew 52 percent year over year. So you might think linear TV viewing decreased. Not so, says Nielsen.

(click image to expand chart)

In fact, linear TV viewing grew 1.2 percent year over year, even as consumption of other forms of video, on different platforms, grew.

The average American watches approximately 153 hours of TV every month at home. In addition, the 131 million Americans who watch video on the Internet watch on average about 3 hours of video online each month at home and work.

The 13.4 million Americans who watch video on mobile phones watch on average about 3.5 hours of mobile video each month.

Out of all different age groups, 18-24 year olds show signs of watching DVR and online video the same amount of time - timeshifting 5 hrs, 47 minutes per month, and watching video online 5 hrs, 3 minutes each month.

http://blog.nielsen.com/nielsenwire/nielsen-news/americans-watching-more-tv-than-ever/

Web Use Shows Serious Fragmentation of Attention

In March the average American visited 111 domains and 2,500 web pages, according to Nielsen Online.

The average time spent per page is 56 seconds. Portals and search engines dominate, capturing approximately 12 of the 75 hours spent online in March.

That's what you call fragmentation.

1 of Every 7 Minutes of Media Use are on Mobile

More than a third of high-use smart phone users are taking action on mobile advertisements, according to AOL Platform-A and Interpublic Group of Companies UM. About 53 percent of smart phone users are clicking on advertisements.

Some 35 percent are requesting more information or a coupon, while 24 percent are making purchases, a new study sponsored by AOL and UM indicates.

The study shows 82 percent of smart phones get used at work while 81 percent are used while people are shopping. Currently, nearly one of every seven minutes of media consumption takes place on a mobile device, and six of every 10 consumers expect their mobile internet usage to increase significantly over the next two years, AOL and UM say.

And though there was a time when mobile Web access might once have been an area where U.S. consumers trailed other consumers, that is no longer the case. In fact, mobile Web access is so widespread that the use cases are morphing.

"Now mobile is less about 'wireless online' and more about being a highly personal, customized medium," says Graeme Hutton, UM director. So the big question is how smart phone applications evolve in the direction of  answering unmet needs. The mobile Web is not simply a mobile version of the PC-accessed Web, in other words. It might be evolving in the direction of becoming a medium in its own right.

http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/04-28-2009/0005014377&EDATE=

E-Commerce Growth Falls off Cliff

The rate of growth for online products plummeted from 24 percent in early 2006 to nine percent in early 2008, while the rate of growth for products bought at retail locations dropped from nine to five percent over the same period.

One can think of lots of reasons why this might be the case. A more mature business grows more slowly.

There's less novelty effect. Perhaps it is just the impact of the recession, and more staples are bought at physical locations.

The issue is what happens after the recession ends. There's a line of thinking that with serious deleveraging happening throughout the economy, consumer spending will not return to its pre-recession level.

Off the top of my head, it's hard to see why this line of thinking is wrong, though it is worth noting that consumer behavior often surprises researchers.

BT, Sony Partner for Calls from PSP

British Telecom is enabling calling from Sony PSP game players. Wwners will be able to call traditional lines, cell phones or PCs. There are more than eight million PSP devices in the European market. Initially, users will have to place their calls from home or from the two thousand BT wireless hotspots.

Eventually the service will be launched worldwide in around hundred countries. The four-year deal between BT and Sony will support messaging and video calling as well.

Google Steps Up Business Effort

Google and Salesforce.com are in talks about an alliance that conceivably could result in a new Web-based offering that integrates some of Google's online services such as email and instant-messaging with those of Salesforce.com, according to Wall Street Journal reporter Vauhini Vara.

Google also is launching a Google Apps Partner Edition, which will let other Internet companies build Google's online word-processing, spreadsheet and email services into their own products. Google Apps Partner Edition has both a free service and a package that includes phone support as well as additional branding and advertising options for a monthly fee.

The proposed alliance neatly illustrates a couple of overarching themes we see these days. Business information technology is changing because of robust consumer technologies built around the Web. As that happens in the enterprise market, value threatens to shift even further away from hardware, premises solutions or access and transport, and up into the "cloud."

And though it is a very odd thought for anybody who has been around enterprise IT or communications for a while, ad-supported services aimed at business users are coming. Premium and enhanced features will be sold for a fee. But lots of smaller businesses might find they can get along just fine with the ad-supported versions.

Over the top managed services providers will like that. Some infrastructure providers , ISPs, competitive local exchange carriers, resellers, cable companies, VARs or phone dealers won't like it so well.

Skype 2.6 for Mac Now Available

Skype has released Skype for Mac 2.6, the latest version of its communication software for Mac users. For the first time, Mac users will be able to enjoy a new Skype feature before it's available to Windows users.

Specifically, Mac 2.6 offers a new call-transfer feature that is exclusive to the Mac platform. Users can now select More > Call Transfer to transfer an ongoing call to another Skype user on their contact list. It is obvious how this will appeal to small business users, especially lone eagles and remote personnel.

Beyond the exclusive call-transfer feature, Skype for Mac 2.6 incorporates a number of nice Skype features that were previously only available on other platforms.

Mac users now can join public chats. There is a chat typing indicator. Skype Prime offers the ability to call a premium-service provider and pay for their advice and knowledge with Skype credit.

Automatic updates are automatically pushed to end users and DTMF tones for automatic answering services are available during Skype-to-Skype calls.

"Free is Going to Win..."

The paid video download market is ultimately a dead end, argues Forrester Research analyst James McQuivey. "Free is going to win."

Online video sites that sell shows and movies such as Apple Inc.'s iTunes will likely peak this year as more programming is made available on free outlets supported by advertising. Sales of movies and television shows are expected to almost triple to $279 million in 2007 from an estimated $98 million last year.

"In the video space, iTunes is just a temporary flash while consumers wait for better ways to get video. They're already coming," says McQuivey, who says the paid download video market a "dead end."

That's certainly the developing conventional wisdom, but might not be entirely accurate. Most video watched today is partly ad supported, and partly subscription based. U.S. Cable TV revenues of $74.7 billion include $33.6 billion of basic cable (ad-supported channels) and $6.5 billion in commercial-free premium channels. Cable advertising is about $5 billion annually. So for linear video, ad support is crucial for most channels.

But "pay to own" or "pay to watch" models also are well established. The "pay to own" market includes $16 billion of annual movie and DVD sales. The "pay to watch" segment includes $8 billion in rental revenue. None of that is likely to change simply because a new distribution method is added to the legacy mix. In other words, "pay per view" or "on demand" always has been a smaller portion of overall video consumption.

So the conventional wisdom probably is right: ad support will drive most online video viewing. But not all. There still will be some appetite for downloading to own, just as people now watch ad-supported video and buy DVDs.

Skype for Salesforce.com AppExchange

Skype now has been optimized for the Salesforce.com AppExchange. That means Skype can be integrated with Salesforce on-demand customer relationship management applications.

Commoditizing SMS?

Given that short message service is a high margin product delivering between a third and half of most mobile operators’ profits, STL Partners wonders what threat third party providers might represent. Alternative services allow users to connect to a third party gateway over the Internet (using GPRS, 3G, or Wi-Fi) and send text messages affordably.

Service provider execs who remain optimistic about keeping the business say users are too lazy or indifferent to the cost of SMS to switch. A general shift towards IM features will moderate costs and provide a richer alternative. There will be spam and privacy issues. And service providers will just drop prices if they have to.

Executives seeing a larger threat suggested that messaging will be embedded in third party applications, notably social networking services, and that operators will lose control of the context from which messages are initiated — as well as the revenue.

The STL graphic shows the percentage of business lost to third party providers in five years.

Will Users Pay for Features?

Alec Saunders and David Beckemeyer are consistently worth listening to. This from David, who asks really good questions:

Fring is technically impressive, but I'm still wondering about its utility

I have mentioned Fring a few times before. The most recent post left it that I had not been able to complete the setup because I never received the SMS from Fring on my phone.

I sat down with Boaz Zilberman of Fring at VON and he was able to solve whatever glitch was happening at Fring that was preventing the SMS and I was able to get Fring 2.0 installed on my phone.

Luca Filigheddu calls Fring "the most complete multi-protocol IM VOIP client for mobile phones" and I would have to agree. That said, I still find myself asking, is it useful?

Like many other cell phone users in the US, I have GPRS data service rather than a true 3G data service with my carrier. My first experiences with Fring over GPRS were not very good. More recently, I have had much more acceptable call quality on Fring GPRS-based calls. It probably depends a great deal on signal strength - while one may be able to make a standard GSM call on a weak signal, it doesn't look like one has any chance of doing a GPRS Fring call unless the GPRS signal is very strong.

This is understandable, at least to anybody that knows the technology. I am amazed that Fring works at all over GPRS and the fact that it's possible to have a decent quality call using it is an amazing technical achievement by the Fring folks.

The entire Fring application is really well done, clean, and slick, also a nifty technical achievement.

At the same time, most customers don't care about technical achievements. They want to solve problems.

Fring is cool and the SIP support works with PhoneGnome so I will use it sometimes, but now that I have it, including SIP support (thanks Fring!), I'm still left wondering, does it really have value, not just to me, but to casual phone users?

For US calls, I already stay within my minutes so there is no cost savings opportunity to place the call via VoIP and, therefore, dialing the old-fashioned way is both more convenient and more reliable for those calls. That reliability factor is a big one, as echoed by many comments to an earlier post on the subject. Perhaps consistent is a better word. Unless I'm calling another VoIP freak, the risk of the call not working isn't worth the benefit (what benefit again?) in most cases. The situation may be different for others, say those outside the US without such a minute bundle model, or if I were making a lot of international calls. Even if that were the case, however, it would still depend on the cost of my data plan. If I'm on a data plan that charges by the Kilobyte, a VoIP call could well cost more than a GSM call. I can already make single-stage international calls using national minutes with a free phone application and my PhoneGnome (or two-stage calls with something like AllFreeCalls.net if it comes back on-line).

If I'm roaming, this is even worse (I think). Roaming fees are so complicated I'm in constant fear of accidentilly using the data channel when traveling. I always shut down any apps that use the data channel (including Fring) due to this concern. So if I'm outside my service, say in Europe, there's no way I'm going to gamble with the mobile data roaming fees and use Fring (again, the VoIP call over the data channel costs more than the same call over the voice channel). The exception would be Wi-fi, assuming I can find a cheap enough hotspot and I have a dual-mode phone (and can figure out how to work it, see this post on theN80i.

That brings up an interesting question. If a VoIP call does cost more than a plain GSM call, are some people actually willing to pay MORE to place a Skype or Fring call because of an added benefit, in particular, presence? I'm not a big Skype user myself (I'm one of those that just never had a good experience using it) and I seldom find my Fring buddies online, so I have not yet seen this to be a big advantage fo rme. However, I can see it being something to look into. That would be an interesting case. So how about it? We've always thought of VoIP as a way to save money, but might you get so much value out of knowing the party is there to take your call that you would actually PAY MORE to place a Skype or Fring call (because of the mobile data rates) because of that added value?

I know in my case, I'm more likely to place a call on my cell using VoIP to access an added capability (say like the call recording feature of PhoneGnome) than I am to use VoIP on the mobile just to save money.

BT to Expose Itself

Project Web21C BETA software developer kit will expose network capabilities to developers working in the .NET Visual Studio, Java, PHP and Python environments. Initially the thinking seems to be to provide developers a way to add communications and global positioning satellite features to applications. The Web21C SDK abstracts the services interface and serialization classes by providing the developer with a simple object model to interact with.

The Web21C SDK provides the ability to embed Short Message Service into an application, for example. It also allows applications to make phone calls, conference calls, presence information, authentication, a way to store and retrieve data about an individual and location information.

A somewhat parallel effort, the BT Applications Marketplace, aims to give developers a way to market apps to the BT customer base.

Satellite Gains at Cable's Expense?

According to a survey taken early to mid March, there's evidence some households are about to make a move to satellite TV, especially DirecTV. While Comcast remains the current leader among U.S. and Canadian TV service providers, DirecTV shows the most market share momentum, says the Changewave Alliance, after a survey of nearly 3700 members.

And though customer satisfaction does not reliably translate into loyalty, it appears that satellite video services rank well on that score. Satellite customers say they are much more satisfied than cable customers. "Moreover, Satellite satisfaction ratings have improved four points since our previous survey, while cable satisfaction rates have declined two points, Changewave says.

DirecTV now is the industry leader in terms of customer satisfaction and has also experienced the biggest improvement since November. Comcast has experienced the biggest decline.

Most significantly, satellite s about to gain at cable's expense, Changewave says. "A total of 13 percent of our survey respondents say they plan to switch providers in the next six months and nearly half of these (48 percent) say they’ll switch to satellite.

Amazon: Compute in the Cloud

Amazon's Simple Storage Service (S3) and Elastic Compute Cloud (EC2) appear to be getting traction. The whole idea is to provide easy to use computing and storage "in the cloud." S3 recently had a peak day with 921 million requests, says Jeff Bezos, CEO of Amazon. At the peak second for the service, there were 16,600 requests. A year ago Amazon had 800,000 "objects" on the service. Now there are over five billion. S3 and EC2 are just a couple of reasons why the pace of Web application development has gotten so blistering.