Changing channels: television's insurgents

Over the next few weeks, television executives will take part in a time-honored ritual of the fall season: crossing their fingers and praying that the millions they've gambled on shows like Pan Am and Prime Suspect turn out to be dollars well spent.
But while the industry keeps a nervous eye on prime time, other players are looking beyond ratings and time slots. They want to break down traditional viewing habits, expand the definition of a hit to include Web-original programs and remake the cable television business model, which relies on charging viewers for hundreds of channels they never watch.
These would-be disruptors might eventually do to television what iTunes did to music and Amazon to books. Cracks are already appearing in the foundations. Cable and satellite TV distributors recorded their biggest subscriber decline ever in the second quarter, and Nielsen has discovered a cohort of younger viewers who are watching traditional TV less and streaming video more.
Among the disruptors are the fast-growing video-streaming services Netflix and Hulu, and tech companies Roku and Boxee, which have developed set-top devices to bring the Web onto television sets with no monthly charge.
Image via WikipediaPerhaps most significant, the group includes Apple, which currently markets an Apple TV set-top device and is rumored to be working on a television set that will appear within the next two years.
The system won't be dismantled overnight. Big guns Comcast, DirecTV and Time Warner Cable are all doing well, and programmers such as Fox and Turner are keeping new content from anyone who doesn't have a multichannel video subscription. And for all the talk about people cutting the cable cord, viewers who watch TV only on the Web remain a tiny fraction of television households.
Evolution before revolution
But as book publishers and music labels can attest, digital transitions can take years to build before they happen all at once. Media observers note growing dissatisfaction with the high price of cable TV packages and the number of alternatives as signs that the market is ripe for change.
“There are a lot of forces putting pressure on the living room,” said Gene Munster, an Internet analyst at Piper Jaffray. “The genie's already out of the bottle from a consumer experience point of view.”
Mr. Munster expects to see big changes starting in the next couple of years. These would include Apple's finally getting serious about the television business and coming out with its own Internet-connected TV set.
From what Mr. Munster and other observers have pieced together, this Apple product would have a built-in DVR, connect to the App and iTunes stores, and allow viewers to store their digital purchases in the iCloud. Like the company's current set-top device, it would interact with other Apple devices in the household.
The Apple TV could provide much of what consumers want from television: à la carte pricing, control over when they watch programs, and a hub for their own media—from photos to home videos.
Roku and Boxee already do many of those things. The Roku player, which sells for between $60 and $100, brings streaming video and music from some 300 Web channels directly to a TV set. There are games, subscription services like Hulu Plus and Netflix, international news and endless Web-original programming.
The Boxee Box, priced at $200, offers more than 200 apps, or channels, including MLB.TV, Netflix and Vudu. It will soon carry Hulu Plus. The service also includes a Web browser and can connect to the user's own media. Neither Roku nor Boxee provides live local sports or much local news. And forget about watching live programming like the Academy Awards.
But as current Web TV devices improve, Mr. Munster says, programmers and television system operators will be forced to respond. “They have to make changes because people are going to continue to cut their cable cord,” he said.
The television industry has faced threats before, most notably when TiVo arrived a decade ago. Viewers began skipping commercials, giving rise to fears that advertisers would flee. Since then, the DVR has become a mainstream device, but marketers still see broadcast and cable programming as the best place to spend their money.
Some observers argue that the current dangers are also being overstated and that the traditional pay-TV model won't be changing anytime soon.
“There are alternatives,” acknowledged Bruce Leichtman, a cable industry analyst. “But the average home is still watching five and a half hours of TV a day.” He blames declines in cable and satellite subscriptions on the economy.
The cable operators are planning ahead, however. While generally dismissing the cable-cutting phenomenon, they've introduced lower-priced packages and new products. Both Time Warner Cable and Cablevision have launched highly popular streaming video iPad apps, and Cablevision has a new DVR service that can record four shows at once.
There has also been progress on rolling out TV Everywhere, a long-discussed system for authenticating multichannel subscribers to provide them exclusive access to content online. The problem that creates for the disruptors is that premium content becomes harder to get.
In addition, networks and studios are increasingly leery of making deals with Netflix, whom they see as a competitor, and Hulu has been put up for sale by its owners: ABC, NBC and Fox. The networks have always worried that the video hub would undermine their core business.
Despite the obstacles, the budding Web TV remains confident.
“The trend is pointing very clearly toward more premium content online rather than less,” said Avner Ronen, CEO of Manhattan-based Boxee. Netflix, Microsoft, Amazon and others “are all investing more than ever in licensing content, and new players are expected to come in as well.”
Boxee is certainly planning for growth. The 4-year-old company recently moved into new quarters in the Flatiron district. With the help of $16.5 million from its latest funding round, it will almost double its workforce to 50 by the end of the year.
The company's aim is to improve its service and to grow its base of 1.7 million users. Mr. Ronen declines to say how many Boxee Box units have been sold since the device went on sale last November. Before that, users downloaded the software and connected to televisions through their computers.
YouTube as cable competitor
The online entertainment universe is also growing rapidly, led by YouTube, which Google has reconfigured into a cable TV competitor that gets more than 90 billion video views a month—up 50% from a year ago, according to the company. (Google is reportedly one of the bidders for Hulu. The company has Google TV devices similar to the Boxee service, but they have failed with consumers.)
Blip.tv, a top aggregator of original Web series, is also booming. It has tripled its video views in the past year, to 330 million a month, according to CEO Mike Hudack.
Producers are getting more ambitious. Digital Broadcasting Group, maker of the successful Web series The Confession, starring Kiefer Sutherland, will double its slate to 40 shows this year. Episodes of one of the new series will run 22 minutes—standard for television—rather than the five to 10 minutes that are the norm for the Web, according to CEO Chris Young.
And then there are niche Web channels like Revision3, whose Tekzilla and Diggnation are hits with the digerati.
“We used to have four television channels; now we have 300 [on cable], and with the Web, it's maybe 3,000 or more that are relevant,” said Mr. Ronen. “We're getting to the point where there's a critical mass of content [online].”
Analysts say that new televisions and Blu-ray players will have the same access to the Web—making set-top devices redundant—but both Roku and Boxee see continued demand for their services. They both filter the endless quantities of Web content through a user-friendly interface, and they can innovate faster than people get televisions.
“It costs much more to replace a television than to add or replace a $79 box,” a Roku spokeswoman said.
Boxee is primarily a software developer whose service could run on a variety of devices, including televisions and Blu-ray players.
“The work we're doing now is laying the foundation,” Mr. Ronen said. “The next three to five years are going to see huge growth in our space, and, hopefully, that will translate into a real business.”


Read more: http://www.crainsnewyork.com/article/20110911/FREE/309119973#ixzz1XgT7vIHe

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Life after Netflix

As you may have heard, on Tuesday Netflix raised its rates for combined DVD and streaming subscriptions. Previously, customers on the one-DVD-at-a-time plan could also stream movies from the service’s Watch Instantly service, for $10 a month. Starting in September for existing customers (and immediately for new subscribers), the price for that plan jumps to $16 per month (other DVDs plans go up as well). Although there may be legitimate reasons why Netflix needs to charge more, many customers find themselves less than thrilled by that 60 percent price hike. I count myself among them.

I decided to take a closer look at Netflix’s new plans, and compare them to the offerings from various Netflix competitors. Is the newly pricier Netflix still the best option for my entertainment needs? Or should I jump ship?

My setup

Before you can adequately determine which movie and television subscription service to choose, you need to figure out what you want, as well as what services your entertainment setup supports. At my home, we’ve long relied on Netflix as an alternative to paying for premium movie channels. We’re aggressive about watching (and returning) our DVDs, and we use the Watch Instantly streaming service plenty too. We rent both movies and TV shows, and we use Watch Instantly when we have neither TiVo’d shows queued up nor a Netflix DVD at home. And we stream shows like Dora the Explorer and The Backyardigans for our kids.

One goal I haven’t quite yet met is cutting my cable entirely. We keep cable for kids shows that aren’t on Netflix (I’m looking at you, Team Umizoomi), for Philadelphia Eagles games that I can’t get over the air with an antenna, and for the ability to watch first-run shows (via TiVo) as they air.

Our entertainment center includes a TiVo HD and a Mac mini. The TiVo supports Netflix’s service—along with Amazon, Blockbuster, and other services—and the Mac mini of course can handle any online service that works in a Web browser. If you instead rely on an Apple TV, Roku Player, or TiVo Premiere, your supported services will differ.

Netflix

The path of least resistance for me, I suppose, is sticking with the Netflix service I already have. But paying $6 more per month to continue the same service I’ve been using means paying another $72 per year. The new $16-per-month rate is actually more than my local cable company (Cablevision) charges for subscriptions to HBO, Showtime, Cinemax, Starz/Encore, or TMC; the old rate was $3 to $5 cheaper than those premium channel subscriptions.

Netflix couples two advantages over HBO and its brethren: the included on-demand viewing with Watch Instantly, and the ability to dictate which movies are “aired” by virtue of choosing my DVDs.

According to Netflix, it has “thousands of movies and TV episodes available to watch instantly”; the Instant Watcher website pegs the exact number at 12,382 streaming movies as of this writing. The company no longer advertises how many DVDs it has—and, in fact, seems to treat its DVD mailing service as an afterthought—but back in 2009, Netflix said it had 100,000 titles on DVD.

The point: You can almost definitely find the movie or TV show you want in Netflix’s DVD library. Your odds are worse (though generally improving) with the Watch Instantly service. Besides its smaller size, Netflix’s streaming catalog is a challenge because it is seemingly in endless flux. While new DVDs arrive while they’re released—or, more often now, 30 days after their initial release—streaming titles arrive when deals are struck, and they expire when those deals expire. In other words, Netflix owns its DVDs and can rent them as long as it wants; streaming titles, however, are on borrowed time (something my colleague Dan Moren has noticed as well).

There’s a lot to love about Netflix, though. Watch Instantly works with oodles of devices, including the iPad, iPhone, Apple TV, TiVo, Playstation, Xbox, Wii, Roku, and oodles of other Internet-ready televisions, DVD players, and set-top boxes. The website is fairly usable, and the movie recommendations engine that Netflix employs is impressive.

So if I choose to abandon Netflix, it won’t be because of any perceived weakness in the product offering. But that’s the combined streaming and DVD offering. I regularly use both. Forced to choose between an $8 monthly DVD plan or an $8 monthly streaming plan, I simply don’t know which to pick. I love the wider selection of Netflix’s DVD library, but I love the always-available, always-on aspect of the streaming service. Is the combination worth $16? I suppose so—unless I can find a viable alternative.

Blockbuster

Spoiler alert: Blockbuster’s DVD-by-mail service and On Demand streaming catalog is not a viable alternative. Here’s a list of the benefits Blockbuster’s offering sports over Netflix’s:

• New releases are often available one month before Netflix or Redbox get them.

That’s it. In almost every other way, Blockbuster’s service is laughably inferior. Start with the cost: Blockbuster charges $12 a month for its one-disc-at-a-time plan. (To be fair to Blockbuster, the company includes video game discs in that plan, so you can rent those too.)

Blockbuster does offer five “in-store exchanges” with its subscriptions. That means you can take your movie back to a Blockbuster store near you (if you can find any that are still in business) and exchange it for another rental. The Blockbusters near me are all shuttered, and one appealing element of DVD-by-mail services is the fact that I don’t need to drive to a store.

At $12 a month to Netflix’s $8 matching DVD plan, Blockbuster’s pricing seems out of whack. You might assume that maybe Blockbuster’s plan at least includes streaming? But you’d be wrong.

Blockbuster doesn’t offer a streaming plan. Its On Demand movies are charged per use, with variable pricing ranging from $1 to $5 per rental. (You can also purchase On Demand movies from Blockbuster, which are then kept in a digital locker from which you can re-stream the movie at any time.) To Blockbuster’s credit, because it charges so much for On Demand rentals, it’s able to stream more current titles than Netflix. At this writing, I could stream The Lincoln Lawyer from Blockbuster for $4, but need to wait for the DVD from Netflix. But I like the notion of paying Netflix a flat $8 rate for streaming from its catalog, versus paying Blockbuster piecemeal.

Besides its lousy pricing and old-school streaming approach, Blockbuster’s a tough sell for Apple device owners. While various Blu-ray players, TiVos, and set-top boxes integrate with Blockbuster’s On Demand service, no Apple products do—the iPad, iPhone, and Apple TV don’t work with Blockbuster at all.

Overall, it feels like Blockbuster’s barely in this fight. The pricing’s nutty, the lack of support on Apple devices disappointing, and the absence of a streaming plan a deal-breaker.

Amazon Prime Instant Video

Amazon doesn’t offer DVDs by mail—unless you purchase them the old-fashioned, e-commerce way. But it does offer a subscription movie and TV show streaming service, and it’s made Instant Video part of Amazon Prime.

Amazon Prime, for the uninitiated, is a $79-per-year subscription that grants the buyer free two-day shipping with no minimum order size, or one-day shipping for $4 an item, for many products. While Amazon sometimes makes Prime available for free to certain customers (as it does with its Amazon Mom program), you must pony up the full $79 Prime fee to gain access to the Instant Video offering. That fee works out to $6.58 per month.

According to Amazon, its streaming library includes more than 6000 movies and TV shows. When I clicked to see all of Amazon’s “Prime Eligible” titles, however, I saw a list of merely 2548 videos—including 513 TV shows.

It’s a bit tough to browse Amazon’s Prime Eligible catalog; you can’t limit your searches to Prime Eligible videos only, and there are many more thousands of movies that you can stream instantly by renting or buying them (for considerably more than “free”).

While Amazon’s digital movies available for purchase and rent can play on TiVos, the Prime Instant videos aren’t compatible. Prime videos also don’t play back on iPads, iPhones, or the Apple TV. They play back fine on your Mac via Flash, and the service is compatible with numerous other devices, including the Roku.

To me, Prime will be tempting only if Amazon’s able to expand its video selection dramatically. It’s great that Amazon has every season of Mister Rogers’ Neighborhood, oodles of reality cooking shows, and the Tom Hanks/Meg Ryan classic You’ve Got Mail. Unfortunately, the service is severely lacking in current titles.

Hulu Plus

Ah, Hulu. Sometimes it feels like proof that the production studios really “get it,” and sometimes it doesn’t. Hulu Plus offers a variety of advantages over the basic free Hulu offering: It includes more than 1000 seasons of current and classic TV shows—more than 33,000 episodes—with 70 shows that are limited to Plus subscribers only. In addition to the “hundreds of movies and documentaries” that Hulu offers everyone, Plus adds “hundreds of exclusive films from The Criterion Collection.” When possible, Hulu Plus content streams in 720p High Definition.

And, unlike regular old Hulu, Hulu Plus can stream to devices besides computers—including the iPad and the iPhone (but notably not the Apple TV).

Hulu Plus costs $8 per month—just like Netflix’s streaming-only package. In an advantage over Netflix, Hulu Plus often includes every (aired) episode of the current season of the television shows in its library, and often includes every episode for every season, though that’s determined on a show by show basis.

Some Hulu Plus content—usually television shows and not movies—includes limited commercial interruptions; Hulu says this is “to keep the price low, given the high licensing costs of current season TV episodes.”

I find Hulu’s site a bit annoying to navigate. It feels hard to get a sense of every show available, since you can’t easily find a master list. Hulu wants you to browse alphabetically or by popularity, and doesn’t offer any obvious way to browse by release date (or even “added to Hulu” date). That’s probably because Hulu adds (and includes) very, very little in the way of new movies; they’re mostly older titles. The current TV shows are great for cord-cutters; the small, largely outdated movie library is disappointing for film fanatics.

Zediva

Man, does the MPAA hate Zediva. When you watch movies from Netflix and its competitors (whether streaming or DVD-by-mail), you often miss out. Many times, studios sell DVD-by-mail services limited discs that lack extras like commentary tracks or behind-the-scenes features, and streaming services almost neverinclude that content.

Zediva’s different. The streaming-only service goes out and buys physical copies of the in-store versions of new DVDs, and when you click to play a movie, that actual DVD is inserted into an actual DVD player. You then take control of that DVD player to play back the movie you want to watch.

It makes for an interesting combination of good and not-so-good. Zediva gets new movies the instant they come out, because it’s not restricted by any studio agreements. The company offers a library of fewer than 200 movies; Zediva’s focus is on stocking the most popular movies of the past year, not every movie ever made.

But because you’re controlling an actual DVD as it plays back, you lose the benefit of even the limited buffering that other services offer. Pause a Zediva movie, and prepare to wait as many as 30 seconds for it to load up again when you attempt to resume. We often have three kids under the age of five sleeping upstairs when we match movies, and rare is the night we don’t have to pause once or twice—not to mention our own bathroom or snack breaks. The sluggish unpausing with Zediva got old fast in my testing.

At the moment, Zediva’s offering what it calls “introductory pricing.” You pay $2 per movie, or $10 for 10 movies. Here’s a case where I don’t mind the pay-as-you-go model, since a buck a movie strikes me as pretty reasonable.

That $1-per-movie pricing sounds familiar…

Redbox

Like Zediva, Redbox charges just a buck a day per rental. And like Zediva, Redbox doesn’t aim to offer every single DVD ever made—though Redbox’s available catalog dwarfs Zediva’s.

The downside to Redbox is that you must leave your house in order to use it. Again, at $1 per movie, I think the price is right. But the problem is that if you don’t get back to the Redbox kiosk within 24 hours of renting, you’re charged another dollar for your movie.

That’s a fair business model—but not one that works for me.

iTunes

I know, I know: Some of you swear by iTunes rentals and purchases. I don’t like it. I don’t like the long wait for high definition movies to download; I don’t like the draconian requirements on how long you get to watch your rented movie before it expires, and I don’t like the relatively high rental prices—$5 for new HD releases. I would welcome a competitively-priced Apple-run movie subscription service, but I’m not holding my breath.

What’s next?

There’s one fact that I believe is indisputable: Pricing issues aside, none of the currently available services can outshine Netflix’s offering. And since no streaming service can rival Netflix’s catalog, you can’t really replace Netflix entirely by combining two services.

My least likely option, however, is sticking with what I have now. I believe that paying $16 a month for a service that was once $10 (and, just a few months before that, $9) irks me. I think the blame for that cost increase falls mostly on the shoulders of the studios that license content to Netflix, although the company hasn’t said so publicly. If enough likeminded customers scale back or cancel their Netflix subscriptions, I don’t know that it punishes the studios—but perhaps it will help send a message. (Particularly if we don’t all start—heaven forbid—buying DVDs again.)

Today, there are many movies on my DVD queue with Netflix that aren’t available to watch instantly. There are barely any films on my Watch Instantly queue that aren’t available on DVD. Thus, one option I’m considering—with a heavy heart—is dropping the streaming and sticking with an $8, DVD-only plan.

I’m also debating dropping Netflix completely, and then signing up for Hulu Plus and Zediva, or (less likely) Amazon Prime and Zediva. Zediva will let me watch new releases I’m interested in, and Hulu Plus just may enable me to cut the cable cord—though I still don’t know what to do about those Eagles games.

Of course, if I cut out cable completely, then maybe it’s worth it to stick with Netflix after all—in addition to Hulu Plus for current shows, since I’d be saving so much on the cable bill. But, at least where I live, the cable company raises your phone and Internet prices if you drop the TV package, so the savings are less substantial than I’d like.

What’s clear to me—and trust me, I get that this is a personal decision for each customer to make—is that Netflix is a no-brainer at $10 a month for DVDs and streaming. At $16 per month, though, it requires a lot more rumination.

Peel is an iPhone-based remote, except when it isn’t

ANALYSIS/OPINION:

You have an Apple iPhone, and you have a flat-panel TV, a home sound system perhaps and certainly a cable/satellite box with a digital video recorder, or DVR. Maybe you also own a Roku player or an Apple TV to stream additional video content to the aforementioned TV.

Want to guess how many remote controls you have? Three or four, perhaps, and maybe more if you have extra gear hooked up to everything. Wouldn’t you rather have just one remote, especially if it could be, say, that iPhone, or maybe an Android phone?

This is — and simultaneously isn’t — the concept behind Peel, a $99 device that sits between your wireless router, your television and the rest of your home entertainment setup. Plug a cable-cum-transmitter into your home network’s wireless router, place the pear-shaped “fruit” by your TV, enter a simple access code into the free Peel app available now for iPhone/iPad/iPod Touch and soon for Android, and you’re good to go. Peel will, its makers claim, control your TV, cable box, digital video recorder, and home stereo system, at a price that’s less than many competitors ask.

According to Peel CEO Thiru Arunachalam, the device, once installed, will let users do “everything a consumer will do on a daily basis” with that warren of individual remote controls.

Well, yes, Mr. Aryunachalam, and no. Instead of what is a “standard” for universal remote control devices, the ability to punch in channel numbers and go to Food Network or MTV or ESPN, you’re offered a range of pictures: an icon for “Law and Order” will find all the episodes currently airing, ditto for a sports program or what have you. Peel’s CEO claims “the concept of channel numbers will go away,” as consumers move to time-shifted recordings of baseball games, streaming rentals from Netflix and downloads via Roku, and so forth.

That may well be the case, and the band Choking Victim’s “500 channels of a day-dream stimulation” will be numberless at some point in the future. For now, most of us watch Fox 45 or USA9 and so on. Hardcore HGTV fans on Verizon FiOS in Howard County know it’s channel 665, and that HBO begins at 901.

Thus, the inability to tap in a number is a bit of a problem, but Mr. Aryunachalam asserts that two soon-coming tweaks: the ability to establish an unlimited number of “favorite” channels — one or two taps on the iPhone screen and you’re there; and a way to search via channel number. Again, tap twice and you switch over.

The channel-number-is-dying postulate comes, Mr. Aryunachalam said in a telephone interview, from what smartphones have done to dialing. Instead of memorizing your brother-in-law’s number, you call up his name in your contact list, tap on the appropriate number, and it’s “dialed.”

I feel as if I might need an Excedrin or two, and soon.

In very limited testing — I installed Peel after my less-than-three-years-old Logitech Harmony One remote’s LCD screen suddenly died — Peel seems to work well, but not as well as one might hope. The search-by-icon paradigm is off-putting to some users, and the lack of a way to directly input a channel number is frustrating. Ditto for no easy means of punching up an on-screen guide to make station selection a tad easier.

Mr. Aryunachalam is smart enough to recognize that customer demand will drive his firm’s actions. If enough Peel users demand a remote that’s more traditional, he’ll rework the software in that direction. And there are other firms who are angling to supply the same market; I know of two, one of whom, Gear4, said they would send a device for testing. TiVo users can also download an application called Peanut, which, if the DVR is connected to your home wireless network, will mimic a classic TiVo remote control.

We’re on the cusp of bringing everything together on an iPhone, iPad or Android tablet. Until that digital nirvana arrives, Peel makes for an interesting, if sometimes frustrating, step in the right direction. Details on the product are at www.peel.com.