HBO for iTunes?

There are lots of rumors about a possible earlier release of the 3G iPhone as shortages build and we approach the June 2008 date when a 3G-capable iPhone will be released. Something else that actually is more important might also be happening at a faster pace, though.

Since most video viewing is substituted for some other mode (you might watch a movie at a theater, or on a DVD, or as video on demand, or on a premium channel or on broadcast TV), changes in the "release windows" that dictate when each delivery mode can get the content also have the effect of shifting revenue shares within the ecosystem.

According to a report published by Conde Naste Portfolio, Apple is on the verge of offering HBO original programs on iTunes. The programming, which would include hits like the Sopranos and Deadwood, offered at a premium to the standard $1.99 an episode fee.

If true, the deal will be a break in tradition as much for HBO as for Apple, and provide further evidence of a quickening pace of "release window" modifications that have more content going to some form of digital delivery.

As release windows change, so do the financial and contractual agreements that govern when content can be made available. That, more than anything else, will determine how successful downloads, streaming and video on demand can become.

Up to this point HBO has been a nearly-complete hold out in the digital and streaming venue. It now is testing streaming for its current subscribers, but has completely avoided any availability for non-subscribers.

Media Consumption: TV Leads, Internet Grows

Adult consumers in the United States still spend more time in front of televisions than they do online, according to a survey sponsored by the Television Bureau of Advertising industry association and conducted by Nielsen Media Research.

Survey respondents ages 18 to 34 spent over an hour per day more watching TV than they spent more time watching TV than they did in online pursuits, the study found. The gap between time spent online and time spent watching TV is closing, however.

In January 2008, TVB found that 18 to 34 year-olds spent 60.6 minutes more watching TV per day (206.0 minutes) than they did online (145.4 minutes). That is down from June 2006, when the gap was 137.4 minutes: 246.7 minutes for TV and 109.3 minutes online. Moreover, TV time decreased while Internet time increased.

A separate study by JupiterResearch and Ipsos Insight reported results in more discrete age groups and found that TV use actually trailed Internet use among the youngest consumers. As of August 2007, US consumers in the 18 to 24 year-old range went online an average of two more hours per week than they spent watching TV.

Neither study specifically addressed multitasking, which can be significant, especially among younger consumers.

"Young people rarely use just one medium at a time," says Debra Aho Williamson, senior analyst at eMarketer. "Often, when they are online, they’ll have TV or music on in the background."

One might be skeptical about a couple elements of both surveys. The TVB study suggests that adults between 18 and 34 spend 115.6 minutes a day listening to the radio.

The Jupiter and Ipsos survey suggests adults 18 to 24 spend three hours a week listening to the radio.

My totally unscientific experience is that none of my 18 to 24 year olds spend any time at all listening to the radio. For similar reasons, I am somewhat skeptical about "time spent in front of the TV."

Verizon DSL: Changing Metrics

As markets change, so do metrics. It used to make sense to count "access lines." Not any longer. These days it makes more sense to count "revenue generating units." And at least in Verizon's case, it is starting to make less sense to count "digital subscriber lines," as FiOS increasingly becomes the lead broadband access product.

To be sure, broadband access markets also are nearing saturation. Most customers who want broadband already buy it. But as Verizon replaces copper plant with FiOS, DSL connections will decline, to be replaced with optical connections.

IGI Consulting points out that Verizon's rate of net additions of DSL subscribers has been slowing for a couple of years. Again, some of that is market saturation, some of it is FiOS replacement. But rates of increase for any product slow as demand is satisfied. Rates also decrease when product substitutes are offered.

In the first quarter of 2008 Verizon FiOS TV customers accelerated to 263,000, a sequential increase of 16 percent. Verizon now has more than 1.2 million FiOS TV customers,19 percent penetration of marketable homes. Over the past year Verizon has added more than 850,000 FiOS customers.

Total broadband subscribers, including DSL plus FiOS internet increased to 8.5 million up 1.1 million or 15 percent from a year ago. Verizon added 266,000 broadband customers in the quarter. FiOS Internet access customers now represent over 1.8 million subscribers, representing 23 percent penetration of marketable homes.

U.S. Internet Video Watching up 64% Year over Year

U.S. Internet users viewed 11.5 billion online videos during March 2008, representing a 13-percent gain versus February and a 64-percent gain compared to March 2007 viewing, according to comScore.

Google Sites again ranked as the top U.S. video property with more than 4.3 billion videos viewed (38 percent share), gaining 2.6 share points over February. YouTube.com accounted for 98 percent of all videos viewed at Google Sites.

Fox Interactive Media ranked second with 477 million videos (4.2 percent), followed by Yahoo! Sites with 328 million (2.9 percent) and Viacom Digital with 249 million (2.2 percent).

Nearly 139 million U.S. Internet users watched an average of 83 videos per viewer in March. Google Sites also attracted the most viewers (85.7 million), where they watched an average of 51 videos per person. Fox Interactive attracted the second most viewers (54.3 million), followed by Yahoo! Sites (37.5 million) and Viacom Digital (26.6 million).

Altogether, 73.7 percent of the total U.S. Internet audience viewed online video during March, comScore says. The average online video duration was 2.8 minutes and the average online video viewer watched 235 minutes of video.

The Internet is Changing

It is said one of the three largest U.S. cable operators now is using technology from Procera Networks to classify and prioritize packets on a much more granular basis than simple Multi-Protocol Label Switching would imply.

Traffic shaping, though some object to its use, seems not to be an optional practice anymore, as the Internet increasingly is asked to supply real-time services such as voice, video and audio that are tough to deliver with assured quality.

That's a big change for the Internet, to be sure. But it seems an irreversible change, precisely because the Internet and other IP networks now are asked to support real-time services that require quality of service control.

Procera Networks announced availability of the PacketLogic PL10000, the latest in the PacketLogic family of deep packet inspection products and said to be the industry's highest-performance DPI platform, with four times the capacity of its nearest competitor.With up to 80Gbps of throughput, PacketLogic PL10000 is purpose-built with tier one broadband network deployments in mind.

Generally available now, the PacketLogic PL10000 already has four service provider customers from around the world and is currently operating in production networks, said to include at least one of the largest three U.S. cable networks.

Procera Networks systems are used by universities and colleges to manage recreational Internet use at times of peak load, prioritizing academic applications. Some university users say compliance with copyright laws is another reason the Procera Networks solution makes sense.

There's a broader issue here. The Procera approach is in line with thinking that it is not enough to prioritize broad classes of applications. According to a developing line of thinking, service providers need to categorize and control specific applications and specific Web sites, or possibly specific users at specific times of day, not simply "real time" traffic or "email" or "file transfers.

That of course will strike some observers as a dangerous violation of historic Internet "anybody can connect to anybody" norms. But the Internet is changing, not least because users want high-quality voice, video and audio performance, and packet classification is a major tool to allow that sort of choice.

There are, to be sure, anti-competitive implications if an access provider wants to behave that way. One has to assume market forces and governmental action will dampen those impulses.

No doubt about it: the Internet is changing.

Sprint loses 1 Million Customers Last Quarter

Sprint Nextel CEO Dan Hesse thinks the hits to operating income will stabilize by the end of 2008, so it is going to be a long year. Hesse declines to comment on speculation about a Nextel spin off, saying only that it might be complicated for technical reasons related to the way the company manages the separate Sprint and Nextel networks.

Tackling the churn problem is the number one job for the rest of the year, as day-to-day management of the WiMAX initiative will be handled by Clearwire executives.

Mobile Internet: More Messaging than Content

Communications--in the form of social networking--might be more important than content for the developing mobile Internet use. Or at least that's what analysts at Informa suggest.

Mobile social networking is based more on communication than content, the thinking goes. Time and again, communication services have led the way for content and advertising to follow, Informa argues. In the case of the Internet, it was e-mail and discussion boards—not Web pages—that triggered the explosion from early adoption to mainstream consumer use. In the mobile arena, the first really successful data service was text messaging. Short message service services drove mobile data use and they still account for the majority of mobile data revenues by carriers.

According to February 2008 research by Informa, the global market for all current forms of paid mobile entertainment should reach $31.7

billion by 2012. That's a lower forecast than predicted in 2006, when Informa suggested paid mobile entertainment would reach $42 billion by 2011.

In the U.S. market alone, mobile data service revenues reached $23 billion in 2007, according to industry trade group CTIA. Mobile messaging for SMS/MMS/IM/e-mail worldwide is expected to be between $100 billion and $200 billion by 2011.