Sky Anytime+ is available to all HD subscribers via any broadband connection homes via b

UK broadband networks have another large scale streaming service to contend with after Sky flicked the switch on making its Anytime+ service available to all of its customers who subscribe to an HD package, regardless of their ISP. Sky estimates that this will bring the Anytime+ service into an additional five million homes.

Sky’s Anytime+ service provides a selection of movies and TV content over an Ethernet connected Sky HD set-top box rather than via its traditional satellite delivery mechanism. Up till this week it was available only to its customers in the UK who had Sky’s own broadband service, but the service will now run over rival networks from the likes of Virgin Media, O2, TalkTalk and Orange.

Sky announced these plans back in January, when it also said it would be offering optical fibre as well as ADSL2+ connections to its broadband customers.

The move to open Anytime+ to all networks means that the BBC has agreed the service to carry its iPlayer service, which is paid for via a national licence fee.

In addition to Anytime+, Sky also announced the name for its à la carte internet service which will be called Now TV. This will enable non Sky subscribers to access a limited range of Sky content via broadband connected devices. The move signals Sky’s increasing reliance on broadband to deliver content rather than over its traditional satellite model, with which it launched its service on 1992.

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Boxee brings it all together

Informa has long believed that the winning video platform will be the one that most conveniently blends a mix of Live TV and OTT into one easy-to-use package for consumers. Conventional logic has always been that this would either come from one of four places: a Pay TV provider, one of the big CE OEMs, Apple or Google. These players are the ones with the clout required to both secure content deals, and to pull off the significant technical integration such a play would require. But at CES, the most compelling vision of this future came from a much more unlikely source: Boxee.

For the uninitiated, Boxee began as a piece of cross platform video software; that software is now integrated into two media streaming devices from D-Link and Iomega. What Boxee showed at CES was a live TV tuner. It’s incredibly simple: users buy  a $50 unit, which plugs in to the back of their TV; this simply takes whatever the user is watching and delivers it via the Boxee box and UI.

Crucially Boxee has done no content deals: the device simply takes whatever the user is watching on TV, no matter who a customer’s operator is. This means that your live TV simply sits as a menu option with all of your other OTT offerings. It also means no more having to flick between your Boxee box and your cable or satellite box.

This should be ringing alarm bells for operators. While it may seem counter intuitive to label a live TV device as a cord cutting device, it’s easy to see how some consumers might not want to take the additional sports (Boxee has deals with most of the big US sports leagues) and movie content, if they are to take all their OTT from the same platform.

Boxee may not be the answer for everyone. It is still a little more complex than what the mainstream needs and a few key OTT services – notably Hulu – are still missing. But for Informa’s money, this is the most compelling blend of live TV and OTT that we’ve seen to date. We’d be particularly excited if Boxee adds a DVR, which it says it is considering (although this would be a much harder feature than live to integrate without the support of the operators). And unfortunately for Informa, and anyone else outside North America, it’s unlikely we’ll be seeing this feature rolled out soon, due to the big differences between different Pay TV systems worldwide.

Watch Qualcomm discuss video over wifi at Broadband World Forum 2011

When Netflix decided to separate DVD delivery from its video streaming service, consumers rebelled. Many dropped both services and the company lost half its value on Wall Street. Trouble like this is commonplace for cable TV and satellite providers, which, according to the American Customer Satisfaction Index (ACSI), both consistently rank low in customer satisfaction surveys.

The ACSI found that for the first two quarters of 2011, “higher fees are significantly dampening customer satisfaction [for cable and satellite TV service], more so than in other industries.” J.D. Powers drew a similar conclusion, finding that customer satisfaction for all TV services fell in 2010.

Price dissatisfaction is only one of the challenges facing TV service providers today.

An even more pressing problem is the fact that consumers are turning to the Internet for more and more rich media. Consumers want instant availability to content on any device, at any time and with the ability to switch from device to device on the fly without interrupting the service. But, the two devices that could potentially manage this device-to-device sharing, the set-top box and wifi gateway, weren’t designed to deliver multiple video streams over wireless connections. This results in a poor user experience.

As a result, consumers are starting to drop traditional cable TV services in favor of on-demand – or pirated content available on the Internet – and a new set of equipment. Consumers, and especially those in the under-30 demographic, simply aren’t satisfied with dated video delivery models.

“Why am I paying $100+ each month for 200+ channels when I only watch HGTV, the Travel Channel and sports?” they ask. “And why can’t I watch the shows I recorded on my DVR on my iPad or Android phone?”

Pay TV Delivery Model Fails to Keep Up with Consumer Preferences

Of course, one of the ways TV service providers respond to customer dissatisfaction is to point to the poor performance of online video. Netflix streams drop and its streaming catalog is growing, but still in the infancy stage. Hulu has limited content and suffers from the same performance issues as Netflix. YouTube is rife with useless and low-quality videos. Illegal BitTorrent videos take forever to download.

Consumers put up with these problems, though, because the price is right – anywhere from free to less than $10 per month. As the price rises, though, say for something like MLB.TV (Major League Baseball), consumers won’t settle for poor performance online any more than they do with cable or satellite TV.

In a pinched economy, the pressure to deliver only the content customers want will become increasingly important. If consumers can get what they want from online streaming and pay-per-view services, while saving money each month, they’ll opt for the flexibility and cost savings en masse. Meanwhile, cable TV and satellite providers may permanently lose their pathway into the home.

High Setup and Support Costs Apply Even More Pressure, Opening the Door to Google or Amazon?

Now, let’s throw yet another wrench into the mix: HDTV. Everyone wants HD streaming, and this demand is even more pronounced among early adopters. Consumers are seeking providers who can deliver HD content to any device, anywhere in the home, and with performance on par with or better than classic cable TV service. If TV service providers don’t think ahead and prepare their offering for this new demand someone else (Google? Amazon? A recovered Netflix?) will come along and steal their business. If past history foretells the future, an offer of a new and more attuned service at a lower price point often results in the demise of the established providers. Trying to ward off competitors using your existing model cannot be a viable strategy in a free market when your customers are crying for change.

The Way Forward: Video over wifi

Today, set-top boxes/DVRs are the hub of video services. An increasing number of savvy consumers dislike these devices, since they know that most new HDTVs have the computing power to make these set-top boxes unnecessary. Meanwhile, DVR functionality tends to be low, with most service providers actually dumbing down the devices by shutting down services and blocking peripheral ports. Thus, in-the-know consumers chafe at paying $15 each month for what is essentially an overpriced, underperforming storage device.

Set-top boxes could conceivably rebound to serve as a hub for video sharing, but most consumers want their content centralized on a device with better sharing capabilities, such as the home gateway. As content shifts away from set-top boxes, wifi gateways will become ever more important.

Unfortunately, today’s installed wifi networks aren’t quite ready for the coming “my content, my way, my device” consumer wave. Today’s gateways don’t yet enable you to start watching a program on your HDTV, before bumping it over to your netbook on the kitchen table and onwards to your iPad as you head to the basement to check on the laundry.

That doesn’t mean this is not technically feasible. It is. New high-capacity, multi-stream capable wifi solutions are starting to hit the market, and some of the major service providers have already expressed the intention to cash in on this new opportunity.

The opportunity for Video over wifi is huge. New, robust wifi solutions can stream content from Internet video services, direct content to be consumed later to appropriate consumer-picked storage depositories, facilitate in-house device-to-device sharing, and even enable carrier-approved P2P sharing to overcome network bottlenecks.

wifi gateways can even help providers lower opex and support costs. New customers will be able to log onto online self-service portals to get setup, and once service is established, carriers will have a better ability to remotely monitor service quality and troubleshoot without sending a service truck.

Is interference from a microwave oven causing an iPad in the kitchen to drop video streams? Onboard diagnostic tools in the wifi gateway will help remote technicians pinpoint the problem at a fraction of the cost of today’s cable or satellite service calls.

Let’s face it: the most important cable into the home these days is the broadband connection. Number two probably isn’t a cable at all, but rather cellular service. Cable and satellite TV services are a distant third. With carriers bundling services anyway, TV service providers would be well served to set their sights on the right cable into the home and the right box (the wifi gateway) to keep up with consumers’ changing behaviors.

Whichever cable TV or satellite provider, or whichever newcomer like Amazon, Google or Apple, figures out how to wirelessly stream multiple video services to multiple devices at once will be able to differentiate itself from competitors in a market where consumers often have trouble seeing any difference from one service provider to the next.

The first TV service provider to meet this challenge won’t have to answer the question of “Why am I paying so much for these services?” Customers of this forward-thinking provider will have a vast range of new services at their fingertips, services better tailored to meet their evolving consumption demands, and services for which they’ll be willing to pay.

Patrick Ribardiere is director of product management with a focus on carrier technologies in the networking business unit at Qualcomm Atheros.

Sources:

1. Netflix debacle: http://www.boston.com/business/technology/articles/2011/09/19/netflix_separates_its_dvd_streaming_businesses/?camp=obnetwork

2. Cable/satellite customer satisfaction survey: http://www.theacsi.org/index.php?option=com_content&view=article&id=246&Itemid=291

3. A good overview of cable TV satisfaction surveys: http://www.fiercecable.com/special-reports/cable-customer-service-struggles-climb

4. JD Power’s survey: Customers of traditional cable providers are particularly dissatisfied with their cost of service. (**NOTE: Last year this study came out on 10/6, so we may want to update this at the last minute.) http://businesscenter.jdpower.com/news/pressrelease.aspx?ID=2010166

Nonetheless, the development is still potentially highly significant, since it signals the first major entry of one of the big US “over the top” (OTT) players into a region that has the kind of high-bandwidth broadband networks that make the OTT guys drool.

Announcing the launch of the service, Hulu CEO Jason Kilar said that the company selected Japan as the first part of its Asia Pacific expansion strategy because of the high demand from Japanese consumers for video content.

Hulu, jointly owned by NBC Universal, News Corp., Walt Disney and Providence Equity Partners, launched its Japanese service on Sept. 1 with a relatively simple business model: For a flat fee of ¥1,480 (US$0.19) a month, subscribers get access to all of Hulu’s movies and TV dramas, which can then be viewed on some connected TVs as well as PCs, tablets, games consoles and even mobile handsets.

Hulu has entered into an exclusive mobile marketing partnership with mobile market leader NTT DoCoMo. Although the companies have not released full details of the deal, DoCoMo has said that it will use its LTE networks to stream Hulu content to tablet users.

A tough nut to crack

Although Hulu might be correct in assessing Japan as the best launch-pad for its Asia Pacific adventure, the company must also be savvy enough to realize that succeeding in Japan will be tough.

Even the country’s powerful private terrestrial broadcasters – Nippon TV, TV Asahi, TV Tokyo, Fuji TV and Tokyo Broadcasting System – have failed to excite much user interest in their online-video offerings on either a subscription-based or ad-supported basis.

Having grown frustrated with their dismal online offerings, the normal fierce rivals have teamed up with advertising giant Dentsu to launch a new service that will enable viewers to watch their content on connected TVs, with the five broadcasters making a total of 6,500 programs available at a cost of about ¥300 per one-hour episode.

But it is not only local broadcasters that are eager for a piece of the online-video pie. Sony launched a local version of the Qriocity video-streaming service in January, offering just 200 local programs priced between ¥500 and ¥1,000 per viewing, though the service has since expanded its content range.

Meanwhile, leading specialist online-video players Gyao, owned by Yahoo Japan, and Nico Nico Douga, owned by Niwango, have found it so tough to generate sufficient revenues in Japan that they are both expanding their operations overseas.

Japanese fixed-line operators are also eager to expand their own online-video services, largely as an extension of their IPTV services. NTT is enabling subscribers of its NTT Plala IPTV service to stream content to their smartphones, tablets and PCs, and leading cable operator Jupiter Telecommunications (J-Com) is planning a similar service.

What’s more, Hulu’s ambitions in the mobile market might well be tempered by the fact that tens of millions of mobile subscribers in Japan already have access to free-to-air broadcast mobile TV via the One-Seg mobile-TV-broadcasting service.

Content the key, as usual

Hulu has arrived in Japan with an array of licensing deals with the majority of US major content suppliers, including CBS, NBC Universal International Television, Sony Pictures Entertainment, Twentieth Century Fox, Walt Disney and Warner Bros.

Moreover, the company says that “additional content will be rapidly and continually added to the service” and, significantly, that it will also look to secure “Japanese-produced content and content from across the Asian region” – though the company has launched with no local content.

If there is one thing that any investor in Japan can tell you – especially the good folks at News Corp., which bowed out of DTH player SkyPerfecTV in 2003 – it is that good local content is absolutely critical to success.

Even though it has nearly 4 million subscribers, SkyPerfecTV has never been able to truly dominate the market, principally because it has relied too heavily on foreign content rather than focusing on developing a strong platform of local content. Hulu is obviously well aware of this and is eager to strike deals with local content producers to bring their content to the Hulu platform.

That seems to be the obvious path to travel, especially since Hulu is attempting a subscription-based revenue model with no ads. Hulu claims that it has selected the ad-free model for Japan because it fits in well with the unique requirements of the market.

The pressure is on

Regardless of the business model, the pressure must surely now be on Hulu to start putting together a respectable range of Japanese content to try to localize the platform and ensure that it does not follow the same path as SkyPerfecTV. But that is far easier said than done.

By far the biggest content providers in Japan are the five major terrestrial broadcasters, though there is a strong independent production sector as well. This includes J-Com, which produces content for the terrestrial broadcasters’ regular digital and satellite channel operations.

Considering that the terrestrial players and J-Com have their own strong online-video ambitions, it is hard to envision what value these companies would get from supplying their top local content to a market newcomer like Hulu. Hulu will most likely have to scout hard for Japanese content producers that do not have their own online-distribution ambitions – a tough task if ever there was one – if it wants to get the type and volume of new local content it is going to need to make Hulu Japan a success.

This, of course, is where things start to get tricky for Hulu. Good-quality content – even on a nonexclusive basis – does not come cheap. And do Hulu’s shareholders really want to shell out serious cash for new Japanese content, considering that they have no experience in such a complex market?

After all, even though Hulu Japan is being offered as an online service, it is still at its core a pay TV service, and quite frankly, what experience does anyone at Hulu have of running a pay TV service in Japan?

Even the Japanese find it difficult to run pay TV services in Japan.

As recently as 2005, HDTV-ready sets were present in just three per cent of the world’s TV households and still seen as something of a novel technology. However, HD set sales are growing rapidly with a net 60 million households forecast to be added in 2011 alone. This means that 23 per cent of the world’s primary TV sets will be HD-ready by year-end.

Owning an HD-ready set does not, of course, automatically mean reception of HD programming. But, by 2016, 70 per cent of the world’s homes with HD sets are forecast to be using them to watch HD programs. Again, the UK is ahead of the game, with 72 per cent of HD-ready homes expected to watch HD programming by 2016. But this time it is well behind the global leader, which is the US at 91 per cent. The UK lag is caused by the popularity of Freeview which is forecast to have only around half of its users watching HD programming by 2016.

* UK ranked 25th (38 per cent in 2011 rising to 72 per cent in 2016)

These numbers indicate that, by the end of the forecast period, TV services in several countries will be approaching the point where most, if not all, of their users are watching HD content. This raises the interesting prospect of a second wave of switchovers after 2016, with standard definition being switched off and HD effectively becoming the new standard definition. The extra capacity freed up by such a move would then raise the possibility of another generation of SuperHD appearing, which would offer an enhancement to what will, by then, have become standard HD.