Sick day with my Boxee-enabled AppleTV

Sorry for the radio silence on my blog. I’ve been down for a few days with the same thing everyone else seems to have. But since I’m a workaholic I had to get some value out of my sick time so I spent as many hours as I could watching TV, movies, and miscellaneous video. All in the name of research, of course.

A few things I learned:

1. The Roku Player’s HD quality is surprisingly good. The upgrade happened earlier this year. Yes, I have hit a few buffering issues as many predicted would be the case — even though I’m on fiber and wired ethernet. But the quality is still sharp and the selection, thanks to Netflix, is expanding dramatically. My wife is getting her Jane Austen fix, my kids are watching all the kids shows they want, and I’m catching everything from PBS documentaries to Clash of the Titans (what kid rasied in that era doesn’t want to see Clash of the Titans again). Not all of that content is available in HD, but we don’t seem to care.
2. HD DVRs are a pain. I don’t even record The Office and 30 Rock in HD anymore because it takes up way too much space and those aren’t shows that need HD quality to be funny. Lost, Heroes, and Fringe are all still on my HD list, of course. Even nerds have their standards. 
3. My Boxee-hacked AppleTV seriously rocks. I mean seriously. With Hulu in there, I did a ton of catching up, including things that were already recorded on my DVR, but with faster access to them on the AppleTV I found it more convenient (if you know me, you know convenience is my watchword) to watch via Boxee. I also started really playing with the personal media sharing that Boxee enables from the home network. It’s as clumsy as most other home-media sharing solutions, but I can see it getting better. Now if Boxee only had a business model. But it is now available in Alpha for Windows, so we’ll see how far it can go before it needs some revenue.

Most of all, I have learned that if I needed to buy a second of any these devices, I would buy the Roku. It’s a bit of an act of faith, on the assumption that more content is coming (a separate post on that coming later). But the price is right and we spend hours watching it. Having a second one for the other TV room makes sense. It’s cheaper than the premium you’d pay to build Netflix into an LG or Vizio TV, and it’s more flexible. But I get ahead of myself, I’ll post on that as a separate topic later today.

Sezmi opens the door to a new kind of set top box

I have written a lot over the past two years about the future of the set top box, both on the cable and satellite side as well as on the consumer retail side. On the consumer retail side, there are boxes that are designed to simulate the cable DVR experience like those sold by TiVo (and as announced at CES this week, by Digeo). And there are those designed to provide over-the-top video experiences like the Roku Netflix player, the Apple TV, and the like. 

Though TiVo has tried to provide the best of both worlds — its DVRs can play a wide variety of over-the-top content from online streams to Amazon Unbox video on demand — because it requires a cable subscription, it ends up feeling like a more expensive version of cable.

So far, no one has seriously offered a DVR that doesn’t require cable or satellite service, even though 60% of what people watch is offered for free, over the air, via antenna. And in most major markets, it’s broadcast in HD.

Let’s do some thinking: imagine a DVR that pulls down CBS, ABC, NBC, FOX and PBS from the air, in HD quality, so you have continuous access to the vast majority of content you are interested in. You pay no subscription for this content. And because you’re one of the 62% of US households with broadband, you also have access to millions of online video experiences, some of which are free and others — like Blockbuster OnDemand and Amazon UnBox — are pay-per view experiences that are at least as good as what cable offers, with the extra advantage that they can be managed with a PC.

This DVR could be sold at retail for a few hundred bucks. It would carry no subscription fees and for at least 20% of the population, it could replace cable. Only the people who have to have Showtime and HBO would be left out in the cold, as long as ESPN, Discovery, and CNN keep putting so much of their content online.

Welcome to the world of Sezmi (as in “open Sezmi” — cute, eh?): an over-the-air DVR that adds online video. And if my estimations are correct, you’ll be seeing Sezmi sold by major retailers later this year.

Think about it — for those of us who spend $100 a month on cable, wouldn’t Sezmi’s value proposition be a great relief? That’s what Sezmi is banking on and the retail partners it’s in hushed conversations with here at CES. I sat down with Sezmi yesterday in their private suite at the Venetian (much nicer than my discount room at the Sahara, I’ll confess). This is a company I’ve been following since they were just a rumor in mid-2007 and were called Building B. They re-branded as Sezmi in 2008 and I last met them at NAB last year where they talked about offering their set top box to tier 2 telcos as a way to compete with cable without having to lay miles of fiber. At the time, I told them that the telco solution was nice, but that I thought they stood a chance of offering this box at retail and that 20% of the population would be interested. That’s 22 million households. That’s more people than have an iPhone. In other words, it’s a target worth pursuing.

Imagine how pleased I was yesterday to hear that they are pursuing both avenues aggressively — working with telcos as well as going straight to retail. I have no doubt we’ll see the boxes in retail later this year. And I’ll be one of the first customers in line. In my case, I won’t be replacing cable, I’ll be adding TV to another room of the house that currently doesn’t have it. That’s a use case I haven’t even modeled and would potentially open a much bigger target audience. Even those economics are attractive, because the additional DVR in my spare room would run me $14 a month — more than $150 a year. One Sezmi box, even if it were priced at $300 would pay for itself after two years of use.

This is Sezmi’s potential even without considering the very elegant consumer interface their box offers or the potential solution they have to solve the ESPN, Discovery, even Showtime problem over time.

Too bad Sezmi wasn’t in retail for this past holiday season. In the words of one retailer who is in talks with Sezmi: “If we had this thing in stores last October as the recession hit, we would probably have 5% market share right now.”

Agreed.

Why Joost canceled its P2P application

Like me, you may have received this friendly email from Joost this week politely informing you that the original Joost application will no longer function as of December 19th.

That’s fine with me, I uninstalled it a long time ago in favor of Joost.com.

For those of you unfamiliar with Joost’s roots, this is a rejection of the Peer-2-Peer (P2P) model that Joost originally built itself on. In early 2007, P2P was going to be the bomb. BitTorrent (the company, not the protocol), was positioning itself as the most cost-effective way to deliver HD content; Joost was launched in the same fervor as the brainchild of the founders of P2P network Kazaa . Back then, delivering video streams cost between 25 and 35 cents per gigabyte depending on your deal with Akamai. P2P was billed as a way to cut costs down to 5 cents. 

Fast forward to today, where CDN competition and great volume deals have gotten streaming down to between 6 and 8 cents per GB. Not as cheap as P2P, but darn close, and with better control over content. Plus, your viewers don’t have to download resource-hogging P2P apps.

Streaming is the proverbial wave of the future. With 61% of the population connected via broadband, with the rise in quality of streaming, streaming is the way that the lion’s share of online content will be delivered for the next few years. By cutting its P2P app and going all .com, Joost is merely accepting the facts and trying to build an audience for itself using the simplest method — an open website. And looking at Joost’s site metrics in the few months it has been available as a dot com, it’s clear this friction-free delivery method is working for them.

In fact, streaming is so easy, we expect piracy to shift from downloading via bittorrent to streaming from sites like megavideo.com.

Apple MacBook won’t let you watch iTunes movies on some displays

This one is slowly bubbling to a frenzy. The new aluminum MacBook has turned up the heat on how aggressively it will protect iTunes video content from being output to an external display. In plain English, if you hook your new MacBook up to a display that is not DPDC-compliant, you will get an error message and you will not be able to play the movies you bought on iTunes. For technical details read this excellent summary from Ars Technica, always a reliable source. 

There are many angry posts going around online, including on Apple’s user forums where people are, appropriately, miffed that they can’t watch content they’ve paid for on legitimate devices (notably, projectors and older TVs, anything that requires a conversion from a digital to an analog or non DPDC-compliant digital signal).  My favorite comment on the user forum was from Al Knowles, who said:

Same problem here as well. I guess they want to be sure we HAVE to buy an
Apple TV.
Not gonna happen.
I’ll buy DVD’s at my local retailer before that happens.

Talk about drastic measures! As easy as it would be to flay Apple for this one. I have to point the finger at the people behind this: the movie studios. They are certainly the ones forcing Apple to do this, since Apple has created a very open platform for video that requires downloading entire files in order to view them. Files which the industry fears are then subject to offline manipulation and sharing. This is in contrast to Netflix streaming, which never lets a complete copy of a movie make it onto any device. 

The industry fear is obvious: you’ll rent an HD movie on iTunes, connect it to your DVD recorder instead of your TV and output a permanent copy for your library archive. Or worse, you’ll then make copies for all your friends. So they figured they can just rely on technology to prevent you from connecting to an unapproved device. The rub comes when you find out how many “unapproved” devices are still legitimate — at least from a consumer’s perspective. And in the end, it’s the consumer’s perspective that will determine whether people turn to alternate means to scratch the video itch. And yes, under alternate means I am including piracy.

What about you: bad call for Apple? Is this just the big, bad movie studios? Do you think Apple will have to relent in response to user outcry?

Om Malik tackles web video’s dirty secret: It doesn’t always work

Interesting post from Om Malik on GigaOm yesterday pointing out one of the problems with online video that people like me who believe online video is the game changer that VOD and iTunes could never be often gloss over. After trying too hard to find and finally watch a jerky, freezy 60 Minutes interview with Barak Obama, Om rightly says:

There are too many points of failure when it comes to web video. These problems are only going to increase in the near future as more and more of us are going to watch more and more video online.

He’s right, of course. You and I are watching an average of 56 minutes of online video a week. That’s only 3.5% of our total viewing minutes, but it’s rising. The longer you do it, the more likely you are to do it a lot. And once you start watching full-length TV shows online, forget it, you’ll blow right past 56 minutes into 2.5 hours-per-week land. 

People at Akamai have been warning me about this forever. They have their hands on 25% of all the web content in the world. And they see that more online video + more of it at HD (let’s admit, 720p) resolution will take network congestion to new depths. As rhapsodic as I wax about the potential of online video (and I need to confess, in our home we watch at least 10 hours of online video a week between Hulu, Netflix, YouTube, and a million viral videos my kids and my wife come across), it is true that it can be spectacularly bad.

Take last night, for example. I recently had been treated to an early preview of some movie trailers at a meeting with Paramount marketing execs. I came home to report to my family on the best of them, including the terribly tasteless but funny Dance Flick. So when the preview finally hit the web, they were eager to check it out. I wasn’t home to witness it, but I was told it was a disaster. The video stuttered and stopped so often that they didn’t come away thinking the movie was nearly as funny as I did, after watching it in large screen glory in a private conference room.

And that’s one of the issues hanging over us: when the video stops and starts, our brains don’t engage the content as fully. The benefits of the medium are lost on us. Advertisers don’t get the intended benefit, content producers suffer from the inability to reach us with their creative output. Oh, yeah, and it’s annoying.

What do you think? Are you generally satisfied with the quality of video you’re watching online? Does it work as well as you think it should?

What do you want from the TV of the future: Internet? 3D?

Very interesting piece posted on Dealerscope this week authored by the Senior Director of Market Research for CEA, Tim Herbert. It’s based on a survey the CEA did about future TV tech. Very interesting results. Let’s start with the obvious first:

Click on image to see bigger version

We do surveys like this as well and I’m going to give you the benefit of years of experience on this one. Here’s what people really want from their next TV: bigger and louder. Yep, it’s that simple. When they say better picture quality, they don’t mean 1080p (though that’s what they’ll buy because it’s quickly dominating the shelves at Best Buy). They just mean big and bright and loud.

Top on the list was energy efficiency. Let’s be honest about what this means — people are supposed to say that. But they won’t pay extra for a TV that saves energy. Next. The really interesting things they asked about were connectivity related: wireless connectivity with DVD players, ability to connect family photos, and internet connectivity. 

Here’s the problem with asking about Internet connectivity (and I’m sure Tim knows this, I’m not implying he doesn’t). People don’t know what that means. Perhaps if you spell it out for them: “Hey, you could watch Hulu on your TV” the number would go up by 10 or 20 percentage points (which would put it in the top 3, I suspect).

Personally, my bet for the feature we’ll see most on the TV in the next 3-5 years is Internet connectivity. I’ll even predict that in 2012, 40% of all TVs sold will have connectivity built in. It will become so critical to TV makers that by then it will be standard equipment. Not only to deliver services but to upgrade firmware as needed. More on that later.

My favorite graph from this study was this one:

click on image to see bigger version

The question of 3D TV has been hovering over the market for a few years now. I saw 3D displays at CES this year and I think they are absolutely fun and enjoyable — to watch one or two movies a year. But as for buying one for the living room, the tech isn’t there yet. Overall, you can see that people don’t do a lot of thinking about what kind of technology should be in their TVs in the future. One that CEA missed was a mirrored screen so that a flatscreen TV can be an attractive mirror when not in use. That will be more important to people than they could say in a survey.

As Netflix rises, Roku drafts nicely behind

Every time I turn around, it seems Netflix is announcing something new. These past few weeks my little fingers have typed furiously to keep up with Netflix, which I will now refer as the company formerly known as the DVD-by-mail company. Two weeks ago, I wrote about Samsung adding Netflix to some of its Blu-ray players. Then there was the announcement that Netflix had finally enabled streaming on the Mac (okay, okay, Intel-based Macs, but still). Then there was the revelation that said company would provide HD streaming on the Xbox 360 and other devices. Finally, I posted just last Thursday that Netflix was partnering with TiVo to expand its streaming to yet another device. (Convenience note: you can mouseover these links to see the text of the page without actually clicking on them)

Just remembering typing it all inflames my carpal tunnel. Now that I’ve had some time to think this through, I’m still impressed with Netflix. But wait a minute. In all this, there’s one definite winner behind all the announcements: Roku.

btw, this is not an ad, this is just the most attractive picture I found on the website: I don't get paid anything if you click on this and order

Yes, I’m talking about the maker of the $99 streaming video box that in my back-of-the-envelope estimations has probably sold more than 50,000 units in the six months since its launch. This is the box that I proclaimed the winner in the over-the-top set-top-box shootout I wrote in July. But secretly, after writing that report, I started to fear for the box’s survival in a world where Netflix is off enabling every other device you’re thinking of buying this holiday season.

Then the recession hit. Follow my logic here: you hear that Microsoft Xbox 360 Live members can stream Netflix to their TV sets. That sounds cool enough to try, you are one of nearly 9 million Netflix subscribers aftera ll, but then you add up the additional costs — $199 for the low-end Xbox 360 Arcade plus a $7.99 a month subscription. Add that up for a year and you have $295. (Of course, the plan from Microsoft is that you already own an Xbox and this motivates you to sign up for the Xbox 360 Live Gold Membership, but just humor me.)

So you then hear that select Blu-ray players from Samsung and LG now allow for Netflix streaming. You were considering a Blu-ray player anyway, so you look into these and find they retail for $349 to $399. Then you hear that TiVo will offer Netflix, but you have to get the $299 TiVo HD at a minimum, not to mention the monthly service charges. You’re starting to feel daunted, so you go to Netflix.com and see all these options on one page so you can figure out which one is best for you.

You find the Netflix Ready Devices page, which shows you all of these options, and what do you see? Roku listed at the top, at a nice $99 price. Oh, and by the way, it’s the only one that comes with built-in wireless connectivity for those who don’t have ethernet in the living room. Especially in a recession, the Roku seems like a low-risk option.

I shared this line of logic with Tim Twerdahl, VP of Consumer Products at Roku, an ex-Netflix guy on Friday. I could practically hear the smile on his face over the phone as he agreed with my logic. Then he confirmed it: “Our sales are up dramatically in October.” And that in a recession.

Of course, the point of all the other boxes is that they do other things, not just Netflix. The Xbox does games, TiVo does DVR, the other guys do Blu-ray. When I shared this concern with Tim, he responded very confidently that I should stay tuned. What I have long been calling the Netflix/Roku box will soon shrug off the Netflix moniker by adding other premium content. This will only drive up sales on this box even more. Soon it will outsell the Roku Soundbridge home audio device that never really got past 100,000 users in four years of selling. There’s a business in this box; Roku is here to stay.

It appears Netflix streaming will go HD with Xbox 360

The details are still coming together, but while I was busy at the Forrester Consumer Forum, this little tidbit came out, as trumpeted by Gigaom via the New York Times. 

Yes, I knew that the new UI for the Xbox 360, due out in late November, was going to feature Netflix streaming. That wasn’t news. But the interesting bit is that apparently, there will be HD movies as part of the deal. Reactions are quite positive so far, from the tweets I’m reading on Twitter. UPDATE: It appears Netflix has plans to roll this out to all its non-PC streaming platforms, not just Xbox 360 — read this post at CNET for details, including the high bandwidth requirements.

And I have to say that while this is a good move, and a relatively easy move, it’s more of a symbolic victory than anything else. For Netflix, the symbolic victory comes in being able to say it will be streaming HD quality movies to the TV not the PC (Hulu.com already streams hundreds of movies to the PC), something that cable companies charge much more for. For the Xbox 360, it will finally elevate the device’s chances of breaking through as a gaming machine to a home entertainment machine. When you add up how many people have watched video on the Xbox 360 — Microsoft says its about 30% of it’s 14 million Windows live customers, or more than 4 million people — that makes it more important than TiVo or the Apple TV in terms of the number of people it’s reaching, as I’ve said before. So going this next step makes sense.

But the move won’t push either company into new revenue or subscriber growth mode. Instead, it will confirm existing subscribers and remind them why they have already signed up in the first place. That’s always a worthwhile goal, especially in a recession, but a modest one.

It’s the long-term effect I’m interested in and I suspect that’s what Netflix is positioning for. Today, when you want to watch a movie, what are your top 5 choices? How different will that list be in two years? Maybe the better way to ask it is, where did you get the last 5 movies you watched? For me, without straining too hard to recall, it’s probably:

1. Hulu.com streaming (watched bits of John Carpenter’s The Thing just yesterday while eating room service)
2. Netflix by mail
3. DVD rental from Hollywood video (it’s like, 2 mins away)
4. Netflix streaming to Roku box
5. Little bits of a movie my daughter was watching on ABC Family.

Here’s what’s not on my list even though I have these options: Apple TV, Xbox 360, premium movie channels, or cable VOD. What’s your five? Go on, surprise me:

Netflix finally includes Macs in its streaming plans

The word at MacWorld is that the Netflix “instant watching” feature is being upgraded to support Firefox as well as Intel-based Macs. This is something the Netflix blog brought up early on as a goal. The Intel-based part means it’s not exactly Mac-friendly, but Netflix says that three-fourths of their Mac users are based on Intel machines so they’re satisfying the biggest number.

Many Mac people will be angry about this, to be sure. Netflix doesn’t seem to be apologizing, though, and is instead likely to position this as yet another in a log line of devices Netflix intends to support: LG Blu-ray players, Samsung Blu-ray players, the Roku/Netflix box, the Xbox 360, and now, the Mac.

Angry Mac fans aside, this is further evidence that the Netflix people know what they’re doing.

Device by device, Netflix is making its modest little service relatively ubiquitous. Unlike iTunes or MovieLink or anyone else, Netflix is shooting to become the base option in video devices intended for the living room. Very smart move.

More on Blu-ray in a recession – forecast down 25%

According to this article from Jacqueline Emigh at BetaNews, Parks Associates (technically a competitor, but a respectable one so I’ll give them their props) has reduced its forecast for standalone Blu-ray players this year to to 4.3 million globally or 2.2 million in the US.

This comes as I’ve been writing about Blu-ray prices falling to $199 for the first time and the economy’s effect on home video overall. First of all, I’ll say that Forrester has never produced a forecast for standalone Blu-ray players so I’m not in a position to comment on the specific number, however it is interesting to note that this new forecast puts the Parks number in line with the Jupiter Research number from earlier this year. (Jupiter Research, as you may know, was a competitor until just a few months ago, we now are one family, which is great as they are some smart folks.) Jupiter had predicted approximately 3 million total Blu-ray homes in the US by the end of this year, on top of just under 1 million last year, which comes out to something north of 2 million in sales this year. So the new Parks numbers line up with the Jupiter numbers. I’m inclined to believe both. (It is important to note that both these numbers are far short of the projections Blu-ray manufacturers are working from.)

The most interesting question is whether PS3 will now have a more cannibalistic effect on standalone Blu-ray sales or less of one. 

The thinking goes like this: PS3s used to be the cheapest way to get a Blu-ray player, and it also happened to play games. However, now that Blu-ray standalone players are so cheap, that is no longer the case. Is it possible that people will postpone PS3 purchases in favor of a $199 Blu-ray player, thinking they can upgrade to the PS3 when the economy improves? or will they instead go from standalone players, spend a few extra bucks to get a PS3, and pat themselves on the back for getting a system that can do gaming and video?

I doubt either will occur, actually. Instead, people in the market for the PS3 will still get one, possibly with fewer accessories, but they weren’t in the market for a standalone player anyway so the effect is not cannibalistic. People in the market for a standalone Blu-ray player will do one of two things: either move downmarket to a $199 or $229 model or just postpone the purchase for next year, assuming that prices will only go lower. In the meantime, the upconverting DVD player they bought last year for $50 will do them just fine.

What are you going to do? Did you plan to buy a Blu-ray player or PS3? What will you do now?