The deepening economic crisis was the backdrop to The Changing CE World conference in Barcelona. It was fitting for Futuresource, the organiser, to start with a status report of the state of the industry and how it weathers the storm. And the news is not all bad, report Jean-Luc Renaud.

Last year’s $480bn global CE trade value seems to be resilient if one goes by the figures given by Sarah Carroll, Director of Continuous Services at Futuresource. Television and AV account for nearly 30% of the total, followed by PCs and peripherals (26%) and consumer mobiles (24%). The latter’s growth sector goes unabated. “Devices that have acquired a ‘must-have’ status are sailing through the troubled waters, like mobile phones and smart phones, in particular, that stand as networked multimedia platform.”

Surely, the recession is biting. CE manufacturers’ profitability is hit, in part owing to exchange rate fluctuation. Consumer confidence is eroding, unemployment is rising. However, in times of hardship, the CE industry, especially the home entertainment component, has been weathering the storm,” says Carroll, “especially those products that have acquired a ‘must-have’ status.

Looking back, the VCR market rocketed in the UK up 440% in the dark days of 1983. Digital cameras and DVD players launched in the late 1990s, survived through the 2001 slump. Cinema box-office coped remarkably well in difficult periods, like the petrol crisis of the early 1970s, and the crash of 1929 filled the theatres…

Futuresource coined the term ‘staycation’ – staying home vacation. Rather then going out to dinner, buy a car or spend substantial sums on one-off foreign holidays, in a period of belt tightening, consumers re-assign their disposable budget to ‘re-usable’ products seen as better value for money such as games consoles, laptops, mobile phones, DVD and (hopefully) Blu-ray players and, naturally flat screens.

Slimmer, hi-res, bigger and ever cheaper, the TV displays – the largest segment of the CE industry – have now acquired the ‘must-have’ status, making consumer demand for them (so far) largely immune from the vagaries of the market.

“Critically, because they occupy the key position in the home entertainment chain – and in the living-room – so far as they are the end-display of choice, TV screens are becoming themselves the trigger and engines of growth for other segments of the content delivery chain,” says Carroll.

The links of this chain are Blu-ray playback devices (still mostly PlayStation3 consoles), HD broadcast services with the associated digital decoders, settop IPTV and digital video recorders (DVRs) and now, increasingly, the so-called networked or connected devices that bring Internet online delivery to the living-room display.

High definition has become the cat-and-mouse playground for the content delivery industry. Packaged media, now in the shape of Blu-ray, is raising the picture quality bar high enough to keep other delivery technologies safely at arm’s length – at least for the short-to-medium term.

Frank Simonis, Chair of the Blu-ray Disc Association’s Europe Promotion Group, reminded the audience “only BD packaged media provides the true high definition content source to optimise the full 1080p flat screen specs.” It is best able to fill the so-called ‘content gap – the 30% of European homes with HD-ready TV screen, but without access to HD broadcast this year, rising to 41% in 2012 – as the installed base of HD displays is forecast to grow faster than the number of HD-reachable homes.

If Blu-ray has the field to itself for filling up this gap, how long will it last until satellite and, more importantly, terrestrial broadcasters reclaim this space and effectively compete for the heart and mind and disposable income of HD-hungry consumers?

The race is on, especially in the broadcasters’ corner. Though the Blu-ray Disc Association repeats urbis et orbis that only a BD disc delivers the Full HD Monty, HD broadcast services – with a “mere” 1080i resolution – are spreading rather fast. The SES Astra satellite direct-to-home operator reckons that by 2010 the platform will be delivering over 100 HD channels, from 48 today, mostly in the pay-TV arena.

HD television services will become even more accessible, and virtually free, on digital terrestrial TV platforms like the highly successful Freeview in the UK. “Free, easy access to HD channels is important to jump-start HDTV,” says Richard Lindsay-Davies, Director General of the Digital TV Group. “By the time of the London Olympics in 2012, Freeview should be delivering 3-4 HD channels nationwide.” In the meantime, system standardisation is still a challenge. Some 18 million homes already watch free TV (Freeview/Free Satellite/Freesat) whereas 13 million homes watch pay TV.

But it is the rise of online content delivery that exercises the minds of packaged media executives. Surely, to online delivery, the HD frontier is farthest on the horizon. So, the debate is not so much whether online delivery will eventually compete with packaged media on the HD front, it won’t. It is rather how many eyeballs it will divert away from broadcast television and packaged media and the impact on their economics.

Staggering figures were provided. In the US, where such data is more readily available, 90 billion videos will be streamed or downloaded this year, of which 50 billion exclude user-generated content. Some 8 billion streams will be made up of TV material (half of them full-length TV programme).

A Nielsen 1000 TVHH Convergence Panel tracking survey in US revealed 85-minute Internet activities per person per day and 275 minutes of television viewing. As for the ‘dual-screen’ experience, when on the Internet, 31% of the 85 minutes are spent watching programme on a TV set at the same time. When they watch TV, only 2% of the 275 minutes are also spent checking the internet on a PC.

“Catch-up TV is the fastest growing Internet/online experience,” John Bird, Principal Consultant at Futuresource, points out. “About 40% of online TV viewers do not watch the same content on TV. Catch-up TV online content is additive to the TV experience.”

The UK has its own success story with the BBC iPlayer. Twenty-one million online TV streams were clocked in April of this year, double the January figure. And nearly 10 million streams were recorded for the commercial broadcaster ITV.

Remarkably, access to TV content via a web-based platform is no longer the exclusive preserve of techno-savvy youngsters: If the 15-to-34 year olds account for 44% of all iPlayer users, 37% is accounted for by the 35-to-54s and 21% by the 55+.

A recent CTAM/Nielsen survey showed that 94% of people prefer to watch TV content on their TV displays, but online TV is 90% PC-centric today. “Migrating online TV to the TV set is where efforts concentrate,” says Bird. “YouTube is transcoding its content onto MPEG, they know where they want to be in five years time.”

Online TV may offer opportunities for advertisers, but it is a ‘no-go’ area for pay-TV. TNS/The Conference Board Q3 2008 data show that if 68% of online TV content was streamed and 38% downloaded free, only 2% was paid downloads, and it was down from 4% in Q3 2007.

Talking of the lot of advertisers in the new television age, much has been said about the fact that interactive, on-demand, time-shifting, recording technology free viewers from the shackles of commercial interruptions. Things may not be as they seem, though. According to a Digital Entertainment survey based on self-administered questionnaires, only 4% of digital video recorder viewers watch live TV and only 6% never skip the adverts, a trend confirmed by UK regulator Ofcom data pointing to the fact that 78% of people who own a DVR claim to fast forward advertisements.

However, in admittedly more precise data based on settop box monitoring, a SkyView/BARB audience survey reveals that 82% of DVR users watch 'live' the programme being recorded, thus only 18% of viewing is time-shifted. Surprisingly, 44% of time-shifted adverts are watched 'as live' – not fast-forwarded. It leaves David Whittaker, Director of Business Development and Advanced Technologies at NDS, a supplier of conditional access solutions to TV operators (who presented the data), to conclue: "Far from weakening the power of advertisers as a source of TV content funding, the use of DVR actually increases advert-watching by 3% and with it the commercial impacts."

More fundamentally, the challenge to packaged media comes from the growing consumer interest in the expanding realm of networked, connected, portable devices with associated web-delivered services,

Internet connectivity bypassing the PC is a major area of development. Games console already take advantage of this with the provision of movie rental, download services (Xbox, PS3). Nintendo is to embed the BBC iPlayer in its Wii console. “Blu-ray players from Samsung include Netflix access services. And BD-Live capability brings the BD player squarely into the community of connected devices,” says Adrian Northover-Smith, Digital Development Manager, Sony UK.

“24/7 web-dependency is slowing shaping new product and consumption usage and. The Netbook has exploded onto the market, with 5 million units shipped this year in Western Europe. Currently used as a communication device, it may become an entertainment device competing with personal media players,” note Simon Bryant, Principal Consultant Consumer Electronics, Futuresource.

The TV set itself does not stay still. Manufacturers are keen to build “wall gardens” where content and applications are bundled with the set, a practice already common in Japan. In the US, Samsung and Panasonic are tying in with Google and USA Today. “TV vendors worldwide are talking to infotainment and entertainment partners for attractive bundles of local news, financial information, weather channel, movie rental services, access to online phone sites, access to e-commerce sites,” Simon Heape, Senior Marketing Manager, Toshiba.

With Internet connectivity spreading to all kinds of boxes, more and more devices will have the same features and functionality thus blurring the line between product definitions. Is the trend pointing to the ultimate convergence device? Does this mean the death knell of the dedicated device?

“No, especially if the dedicated device performs a particular application to a very high quality in an extremely user-friendly way,” says Richard Bullwinkle, Chief Evangelist, Macrovision. The problem with an all-in-one box is that the various applications built in evolved at difference paces. Especially at a time when product life-cycles are getting shorter and technological advances are moving fast, a multi-function device may not be the most efficient way of controlling a networked environment, at the lowest cost.

Furthermore, not all applications have unified specifications and industry support, and upgrading imbedded devices may be difficult. So, the convergence device may still be the Holly Grail.

Japan is often see as the hotbed of new entertainment technologies and Eisuke Tsuyuzaki, VP Corporate Development & General Manager at Panasonic, gave a glimpse of things to come. He identified three Tsunamis: Transition from analogue standard definition to digital high definition, progression of storage devices and availability of high-speed broadband network. “Because the product life-cycle is so short, it is imperative to get the product 100% right at launch. Even riskier is that, in a highly competitive marketplace with rapid price erosion and razor-thin margin, a product must be launched on a global scale.”

He noted that in Japan it is broadcast TV that pushed the video quality experience NHK’s Hi-Vision HD channels that launched in 1991. This has triggered in no small measure the market for large TV display (50”+) and built the market for Blu-ray recorders. Unlike in the US and Europe, Japanese are recording addicts.

On the horizon, Tsuyuzaki sees next-generation growth in the 3D field, with the company’s Twin Full 1080p resolution and 3D Blu-ray, moving to 3D 1080p HDTV systems with active glasses.

Another promising area is digital copy in terms of convenient and fast transfer from DVD to digital portable devices (Flash and HDD), as well as the copying of downloaded content into a PC to mobile devices. As for BD-Live, it will push the envelope into personalisation of user profile, link to portable devices, and social networking. Flash memory is sees as the key engine of growth for multi-purpose mobile devices, portable video devices and networks.

The TV set is becoming the service hub. It started with HDMI where one remote handset controls multiple devices (i.e. Panasonic VieraLink, Sharp AquosLink, Sony Bravia Theater Sync, Toshiba RegzaLink).

However, the backbone of new services offering is the growth of very high-speed broadband, Tsuyuzaki argues. The spread of network-enabled TV sets closely relate to the broadband infrastructure. Speed defines the type of TV-centric content/application available for download.

Pointing to what the future holds, Panasonic is implementing TV centric VieraCast applications that include photo share sites via mobile, TV or PC; AVC HD sample contents, puzzles, games; remote viewing through doorphone, Blu-ray recorders and TV sets for home security applications via wireless Ethernet.

IPTV via broadband is also a key area holding great promises so far as exclusive content can be created, according to the Panasonic executive. So, whatever the technology, however user-friendly and affordable, Content remains King.

“Last, but not least, ultra high definition television is coming your way,” announces Tsuyuzaki. The Minority Report-like intuitive interactive TV screen is not yet around the corner, though. The wall-size 2,000 x 4,000-pixel resolution, 22.1 audio TV panel is scheduled for 2015. So, read this space.

Story filed 24.11.08