The Battle Over Your TV

17 Comments

If you were thinking of starting a set-top box company that delivers video content to the TV, let me stop you right there. There are already numerous players vying to dominate your digital entertainment future, and three of them are big names that you already know. Those three are also well-funded, well-equipped, and well on their way to becoming the center of your home video universe.

Amazon: The e-tailing giant just announced its new Video on Demand service, which will stream 40,000 movie and TV titles directly to Internet-connected Sony Bravia TVs and other devices. In addition to already having a huge user base to which it can market the service, Amazon will store all purchased movies on its end rather than with the end user, an approach that is likely to endear it to piracy-hating studios.

Currently the big sticking point with Amazon’s VOD service is that it doesn’t offer movies in HD — a must for this day and age. And hopefully the company will learn from Unbox, its earlier download video service that only worked on PCs and TiVos and didn’t exactly set the world on fire.

Netflix: The DVD-by-mail rental company is prepping for a disc-free future by streaming 10,000 of its titles to the Roku and the Xbox 360. Both offer an all-you-can-watch video buffet baked right into your existing subscription, which makes using the streaming service a snap.

But if Netflix is going to beat out the competition, it needs to build that catalog far beyond just 10,000 titles (most of which are pretty lame). It also needs to offer HD video. The Roku and Xbox 360 are HD-capable, but no word yet as to when HD titles will be available.

Apple: Steve Jobs & Co. helped spark the latest digital video revolution through iTunes and Apple TV, the set-top box that pipes iTunes content directly to your TV. Titles from all the major studios are available on the same day they’re released on DVD, plus the signature Apple simplicity and style makes it hard to beat.

Apple has said it’s renting or selling 50,000 movies a day through iTunes and the service is projected to pump out 18.25 million movies this year. But what we don’t know is how many actual Apple TV boxes the company has sold. The device was projected to sell 1 million units in 2007, but barely sold 400,000. It was then relaunched in January of this year with a renewed effort behind it; popular shows like “The Office” and “30 Rock,” however, still aren’t available.

And while these three have the best shot of succeeding in the digital video download space, they are by no means the only ones trying.

Game consoles, long considered a way for companies like Microsoft and Sony to establish a beachhead through which they could offer more services, are now boasting video capabilities as well. In addition to the Netflix streaming capabilities of the Xbox 360, there is also the Xbox Live Marketplace, from which you can purchase downloadable movies and TV shows. Meanwhile, Sony just launched its video service for the PS3. But the appeal of these devices will always be largely limited to gamers.

Televisions with Internet functionality built in could eliminate the set-top box altogether by offering access to web video directly or using the new tru2way technology to deliver interactive TV functionality. A shift from set-top boxes to the TV would benefit Amazon and Netflix most, as Apple would likely be loathe to give up that much control.

The real wild card in this battle will be the efforts of the cable and telecom companies. Their set-top boxes have a huge footprint in the market (Comcast alone has 24.7 million cable customers), and they have proven, by throttling certain kinds of traffic, that they can play dirty. Now they’re even considering usage-based pricing, which would mean that the more video you download or stream through the Internet, the more you pay.

There are other participants, some that are well known, like HP with its HP MediaSmart Connect, or TiVo. And some are upstarts, like Vudu, Zv, Verismo and Sezmi. But the future belongs to Amazon, Netflix or Apple. It’s still too early to tell which one will win the race to your big-screen TV, but they all have the right combination of size, recognition and content to get there.

This was originally published in BusinessWeek.com.

17 Comments

Keith Cruickshank

While there seems to be continued interest in the idea of set-top boxes as discussed in this story, I’m confident that internet video will be far more transformative as we move away from old-style couch viewing and move towards more interactive and dynamic consumption of video. Think more about changing behaviors than changing technologies. Keith Cruickshank (woodtreks.com)

David Mullings

I agree with those who think more boxes in the living room is really the way of the future. Even Blu-ray vs. HD-DVD is irrelevant in the medium-to-long-term because everything is going digital.

Right now mainstream people don’t seem to realize how easy it is to attach a Mac mini to their tv and watch Hulu, Joost and more instead of spending tons of money on cable BUT with increased education, it will happen.

Apple is the best positioned to take advantage of digitization of content and I do see them eventually releasing an actual TV, but with a Wii-type remote (touchscreen is so old school now), a built-in Mac mini and access to the iTunes store.

That device is a true convergence device and will allow Apple to be the hub of your living room, which is what everyone else is after.

My bets are on Apple.

Yuvamani

Stark Ravin:

I agree with jose2. My parents and brother were surprised when I attached my laptop to the tv with 1 vga cable and 1 audio cable. They were surprised that you could actually do that and the quality also rocked. If more people knew, they might choose that route.

I have my mac mini firmly attached to my tv. It is amazing, I can actually watch hulu, youtube, dvds, itunes downloads, unbox streams etc on my tv. And i get to check email and weather pretty quickly too. Sadly, most people think its geeky or rocket science. It is nether, The mac mini occupies less space in my setup than the comcast set top box, And it looks far sleeker too. It is not hard to setup, as I mentioned its two cables (in fact as easy as anything else). The problem is awareness really…

jose2

Thank you for your comment, Stark Ravin.

Yes, I do think folks will hook up their laptops to their tv’s once they see how easy it is. Do you really think “everyday consumers” are going to spend up to $500 for a box that only provides SOME internet content? Why is it so hard to grasp the concept of using the “box” you already have? I’m watching all kinds of internet television and movies ON MY TV piped in through my laptop. And lots of stuff you can’t get on cable or satellite. Zipityzap makes it easy and its free.

Stark Ravin

To the commenters who hook their PC up to their HDTV: Do you actually think normal people are going to do that and mess with the headache of a flaky Windows box to watch their favorite shows? You are not even an early adopter crowd; you’re a no adopter, geeky crowd that engages in unnatural acts to get at the video content you want.

Everyday consumers are not going to do that. They are going to accept promotional offers from cable companies who offer to install all the gear and hand them one remote to control everything.

Apple is trying very hard to make video over the internet just as easy and acceptable as a cable company offer that arrives in the mail. They know the market isn’t quite there though. It will take a lot of marketing dollars to educate consumers about these new sources of video. And Apple knows how to educate consumer markets and bring “the person on the street” into the mix. Amazon and Netflix I have less confidence in doing this. Educating markets is expensive, but Apple has done it for decades now. First with the personal computer, and most recently with smartphones.

Kawika Holbrook

Perhaps Apple or some other enterprise will eliminate the need for all the boxes by building them into the TV itself. Given it’s design and usability prowess, Apple may have the best shot by turning Apple TV into an actual TV.

jose2

Great article but I’m going to bet that all of these “boxes” (and internet-ready tv’s) will flop. You can connect your laptop to your TV with a $20 cable and get whatever you want from whomever you want. Rent from Netflix (without Roku), Blockbuster, Amazon. It won’t be long until Quartics chip comes embedded in new PCs and TVs. Then you can throw out the cable. Find out how at Zipityzap.

FiletOFish

I’m w/Mr. Lilly. I have a 46″ XBR4 in my living room hooked to a $400 box. I enjoy Joost, Hulu, & Fancast in addition to Netflix and a handful of other sites. I know there are 100s I’m yet to discover.

Also, the whole “rent on demand” allows companies like AMazon to compete with OnDemand and Blockbuster.

They need to figure our a way to make the Netflix “subscribe and go” model to work & take on the Telcos/Satellite folks.

BTW, I just canceled Comcast today…$70/mo is stupid when I watch 6 HD channels.

Q dub

Definitely don’t agree that HD is a must have today. This is merely true for sports, but not VOD content which is mostly movies and TV shows. Consumers are far more keen on accessibility, simplicity, and selection–which reflect a slow convergence of computing and entertainment activities.

Matt Lilly

It will be very hard for any set-top-box startup or established company to generate significant revenue in the future.
Most new plasmas now can be used as computer monitors. The rest is very easy: plug your computer to your TV and stream movies from Hulu or Joost.

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