Internet TV – Unclear how it is going to work

If you read this blog regularly you will know I am very excited about how the internet will change the TV industry (most of the posts are here) – well this week I have found myself at a bit of a low point. It seems to me there are three basic models and I can see is problems with all of them (from the perspective of how we might make some money out of them).

  1. The large scale IPTV plays – from the likes of BT Vision – I think these guys have an important infrastructure role in matching content to network conditions and devices and maybe in billing, but I just can’t see them getting the retail side of things right. I hear that BT have hired a team of media folk to run the operation, so maybe I’m wrong here, but I haven’t seen anything so far which to dissuade me of this view, and I have seen a few things that worry me.The opportunity for startups here is selling infrastructure to the likes of BT (or VirginMedia etc.) – which is only interesting if you believe they will be successful.
  2. Pure internet plays going after the mainstream – Joost and Babelgum – these companies have done a great job at building profile and in the case of Joost getting a LOT of people on their pilot. A lot of smart people think these businesses will be successful and I’m sure they will be – to me the obvious questions are how they will get enough content onto the platform to tempt audiences away from the comfort of what they know and love and whether the P2P model will scale (this is such an obvious question that I’m sure there must be a good answer to it).Now that Joost has taken its investment I’m not sure there is much in the way of further opportunity for startups and VCs.
  3. Pure internet plays initially targeting niche audiences – SecondsOut and VingoTV are good examples. Loads of opportunity here for entrepreneurs and VCs alike and this is the area I’m intuitively drawn to – I like the way they aggregate global audiences for an offer that mainstream TV can’t deliver. The question I’m struggling with is how to think about these types of business scaling beyond their initial niche.

Answers on a postcard….

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  • 1. My main problem here is the large capital cost of IPTV systems. I’m not sure how the rollout of BT Vision is being accounted for but it is not cheap for a possibly low ROI

    2. P2P is good for offloading the infrastructure costs to ISPs/Consumers. I expect the ISPs will start putting clauses into their agreeements limiting the usage of P2P, which will effect the efficiency of the P2P network and consequently the user experience. The Skype protocol is not particular good P2P protocol.

    3. I see discovery here as the main problem to success.

    I guess the really big area for investment is in the EPG aspects of Internet video. TIOTI is an obvious candidate. The main hurdle I see for them is tying in effective delivery to provide a good user experience. Particularly as Internet TV goes mainstream and the audience is less interested in understanding how the stuff is delivered. It’ll be interesting to see how Apple goes. I can see a very powerful service based around their Apple TV device and the FrontRow software.

  • 1. My main problem here is the large capital cost of IPTV systems. I’m not sure how the rollout of BT Vision is being accounted for but it is not cheap for a possibly low ROI

    2. P2P is good for offloading the infrastructure costs to ISPs/Consumers. I expect the ISPs will start putting clauses into their agreeements limiting the usage of P2P, which will effect the efficiency of the P2P network and consequently the user experience. The Skype protocol is not particular good P2P protocol.

    3. I see discovery here as the main problem to success.

    I guess the really big area for investment is in the EPG aspects of Internet video. TIOTI is an obvious candidate. The main hurdle I see for them is tying in effective delivery to provide a good user experience. Particularly as Internet TV goes mainstream and the audience is less interested in understanding how the stuff is delivered. It’ll be interesting to see how Apple goes. I can see a very powerful service based around their Apple TV device and the FrontRow software.

  • mcsteen

    Nick,

    The answer to your question is in the illustration that accompaines your blog entry.
    It is essentially the supply chain for content delivery over the internet. When you examine the diagram to determine the weakest link (and the problem with content delivery) what do you discover? It is not the provider and their format, that’s been solved. It could be the Internet cloud because there are many layers to the cloud, but the network does work the way it was designed, although it needs some vast improvements. It’s not the TV because it does what is supposed to do. The weakest link is the PC. It is trying to do something it was not originally intended to do, that is: be a consumer electronic device that delivers rich media content. Part of the problem, well actually all of the problem, lies in the operating systems. OS systems today try to do everything, and specialize in nothing. The multipurpose operating system creates problems when you need resources for rich multimedia. If you want to get high quality resolution and throughput you need better controls over processing. The Xbox is a perfect example. It doesnt need all the baggage of windows because you are only going to be running games on it or MS Live. So the answer to the problem of delivering high quality content on the network is to develop a system and method that is similar to the Xbox, PS3, and Wii where the game console has specific processing functions and the smarts are in the cartridge. Yes, that would mean that every content provider would have their own operating system that allowed them to control the distribution and delivery of their content. Nutty, I know. So how does every content provider get their own operating system? Well that is the secret sauce of course, and you wanted responses on a “postcard”. If you would like some more details, we have buckets of code and documentation for you to look at. Fun Stuff!!

    I bet it just dawned on you that if content providers had their own operating system that they could offer thousands of services beyond their own content to that consumer. And that every consumer with that OS is now a node in the content providers network. That’s compelling!

    michael

  • mcsteen

    Nick,

    The answer to your question is in the illustration that accompaines your blog entry.
    It is essentially the supply chain for content delivery over the internet. When you examine the diagram to determine the weakest link (and the problem with content delivery) what do you discover? It is not the provider and their format, that’s been solved. It could be the Internet cloud because there are many layers to the cloud, but the network does work the way it was designed, although it needs some vast improvements. It’s not the TV because it does what is supposed to do. The weakest link is the PC. It is trying to do something it was not originally intended to do, that is: be a consumer electronic device that delivers rich media content. Part of the problem, well actually all of the problem, lies in the operating systems. OS systems today try to do everything, and specialize in nothing. The multipurpose operating system creates problems when you need resources for rich multimedia. If you want to get high quality resolution and throughput you need better controls over processing. The Xbox is a perfect example. It doesnt need all the baggage of windows because you are only going to be running games on it or MS Live. So the answer to the problem of delivering high quality content on the network is to develop a system and method that is similar to the Xbox, PS3, and Wii where the game console has specific processing functions and the smarts are in the cartridge. Yes, that would mean that every content provider would have their own operating system that allowed them to control the distribution and delivery of their content. Nutty, I know. So how does every content provider get their own operating system? Well that is the secret sauce of course, and you wanted responses on a “postcard”. If you would like some more details, we have buckets of code and documentation for you to look at. Fun Stuff!!

    I bet it just dawned on you that if content providers had their own operating system that they could offer thousands of services beyond their own content to that consumer. And that every consumer with that OS is now a node in the content providers network. That’s compelling!

    michael

  • Hi Nic,

    The economics of BT Vision are interesting–I wonder how it will play out if BT achieves a meaningful level of penetration off any individual DSLAM. Is this a business predicated on low penetration? It would be interested to see how VideoNet is doing under Tiscali right now.

    On model 2, p2p, there is the challenge from the ISPs. A bigger challenge with Joost is that they are also trying to change behaviour, and I am not sure how that will play out compared to the availability of video content on YouTube, et al. Am sure Joost will create hooks into the establish clickstream, but they’ll need to.

    On the niche channels, I question the economics as well. (Look at Aggregator.tv!) In particular, the platform one builds is solely an increasingly affordable Web streaming platform, but every niche you create has the same unattractive economics (develop content expertise, recruit users, sell niche advertising). It becomes ugly and unscalable.

    To this you can add what I would describe as ‘zeroconf’ IPTV distribution platforms. Inuk Networks is one which I am involved in. Protocol agnostic, standard, understandable content (Multichannel package) and then rolling out more niche content across the platform. You shd take a look,
    aa

  • Hi Nic,

    The economics of BT Vision are interesting–I wonder how it will play out if BT achieves a meaningful level of penetration off any individual DSLAM. Is this a business predicated on low penetration? It would be interested to see how VideoNet is doing under Tiscali right now.

    On model 2, p2p, there is the challenge from the ISPs. A bigger challenge with Joost is that they are also trying to change behaviour, and I am not sure how that will play out compared to the availability of video content on YouTube, et al. Am sure Joost will create hooks into the establish clickstream, but they’ll need to.

    On the niche channels, I question the economics as well. (Look at Aggregator.tv!) In particular, the platform one builds is solely an increasingly affordable Web streaming platform, but every niche you create has the same unattractive economics (develop content expertise, recruit users, sell niche advertising). It becomes ugly and unscalable.

    To this you can add what I would describe as ‘zeroconf’ IPTV distribution platforms. Inuk Networks is one which I am involved in. Protocol agnostic, standard, understandable content (Multichannel package) and then rolling out more niche content across the platform. You shd take a look,
    aa

  • Jon Smirl

    IPTV receivers already exist but most people wouldn’t recognize them for what they are. The DLink DSM-520 is one, it is a UPNP AV Media Player. I have a Twonky Media Server which I record shows on using MythTV. Together these two pieces provide a local video on demand capability.

    Once the global protocols are agreed on, the firmware in the DSM-520 could be modified to pull content down from the Internet.

    Note that the DSM-520 doesn’t need a fancy TV, it will hook up to any computer monitor. You get optical/coax audio out for a 5.1 stereo.

    The biggest barrier to more devices like this is the MPAA and their “protected video path”. I have FIOS now and all of the channels are encrypted. I have to get a settop box from Verizon for every TV I want to use. With Comcast this wasn’t the case, the first 60 or so channels were not encrypted. I find it extremely annoying that content I have paid for continues to be encrypted inside my home. This is almost enough to make me get rid of FIOS, but I recognize that it is not Verizon’s fault. I’m sure the MPAA is going to try an push onerous encryption requirements on to IPTV too.

    Intel is behind UPNP.

    http://www.dlink.com/products/?pid=438&sec=0
    http://www.twonkymedia.com/
    http://www.intel.com/cd/ids/developer/asmo-na/eng/downloads/upnp/overview/index.htm

  • Jon Smirl

    IPTV receivers already exist but most people wouldn’t recognize them for what they are. The DLink DSM-520 is one, it is a UPNP AV Media Player. I have a Twonky Media Server which I record shows on using MythTV. Together these two pieces provide a local video on demand capability.

    Once the global protocols are agreed on, the firmware in the DSM-520 could be modified to pull content down from the Internet.

    Note that the DSM-520 doesn’t need a fancy TV, it will hook up to any computer monitor. You get optical/coax audio out for a 5.1 stereo.

    The biggest barrier to more devices like this is the MPAA and their “protected video path”. I have FIOS now and all of the channels are encrypted. I have to get a settop box from Verizon for every TV I want to use. With Comcast this wasn’t the case, the first 60 or so channels were not encrypted. I find it extremely annoying that content I have paid for continues to be encrypted inside my home. This is almost enough to make me get rid of FIOS, but I recognize that it is not Verizon’s fault. I’m sure the MPAA is going to try an push onerous encryption requirements on to IPTV too.

    Intel is behind UPNP.

    http://www.dlink.com/products/?pid=438&sec=0
    http://www.twonkymedia.com/
    http://www.intel.com/cd/ids/developer/asmo-na/eng/downloads/upnp/overview/index.htm

  • kerry ritz

    it looks like the correct link to Vingo should be http://www.vingo.tv

  • kerry ritz

    it looks like the correct link to Vingo should be http://www.vingo.tv

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