23 July 2013

Nimble TV Hits Its First Roadblock - Dish

Nimble TV, a TV Everywhere-oriented startup, has just been cut-off by Dish Network from providing Dish's service via its service (FTABlog broke the story which went wide when All Things D picked it up).
"No Dish for you, Nimble TV", apologies to the Soup Nazi

In a nutshell, the concept of Nimble TV was that a consumer would use it to subscribe to an existing multichannel provider but get an enhance service over what the MVPD typically provides to its customers. Instead of having the consumer premises equipment (e.g., set-top box, satellite antenna) at your home, it would instead be at Nimble TV's location. The service would then be delivered by Nimble TV to you via the Internet and your DVR would be provided by Nimble TV in the cloud with its recordings similarly delivered to you via the Internet. This promised a number of advantages. First, your service and recordings would be available wherever you happened to be (e.g., at home, on the road, or at a vacation home). Second, Nimble claimed that you could subscribe to any multichannel provider, you would not be limited to the ones that provide service to your home. For this, Nimble would charge its customers an additional fee above and beyond the underlying multichannel subscription.
As I noted in my initial post on Nimble TV last year, I thought that the multichannel providers who would not allow Nimble TV to subdistribute their service without an agreement (and they may not even have the right to subdistribute their service in this way in their affiliation agreements with the programmers). Apparently this is exactly how Dish saw the issue when they cut off Nimble TV.

My assessment is/continues to be that the idea of providing an MVPD's service outside of its service area is doomed for the reasons outlined in my earlier post. More positively, the idea of a very high capacity cloud DVR that is available everywhere seems like a compelling benefit and live/VOD TV Everywhere functionality would be a nice thing to have.

On the positive side, Nimble TV's service is available direct to a television via a Roku box, making the use of the service in the first-screen setting relatively easy. This was not clear at the time of my first post, but the development was not unexpected.

Since my post about Nimble TV, it is clear that the value that Nimble TV is providing is less than what they had discussed at that time, prior to launch. Then Nimble TV was talking about a service with a 10,000-hour capacity DVR and its TV Everywhere features for "around $20" over the cost of the underlying programming package. Now, in reality, Nimble TV, per its website FAQ, offers packages that start at $29.99 including programming and a 90-hour DVR (presumably that service is solely over-the-air broadcast service similar to Aereo's $8/month 20-hour DVR service, since few MVPDs offer a service with many cable channels that price -- in any event Nimble isn't being transparent about which provider's service one might purchase ahead of time, but is once one is connected -- the items are billed separately to one's credit card). A 90-hour DVR is nice -- much higher capacity that the DVR's typically provided by MVPD's, but still a size that requires managing one's storage rather than having effectively infinite capacity. That's a big difference for a user -- the difference between having to think about saving things and not having to do so (akin to how Gmail's original 1GB storage offer revolutionized the web email marketplace).

In addition to the service diminution Nimble TV has experienced, it is also clear that the MVPDs are moving towards higher capacity cloud-based DVRs and making greater amounts of programming available "everywhere".  One gets the feeling that the window for the sort of service that Nimble TV might be able to provide with the cooperation of the MVPDs is shrinking as the MVPDs themselves roll out similar, if not identical services (Cablevision's new cloud DVR offering is 75 hours of HD storage and the ability to record 10 simultaneous programs for $12.95/month). Perhaps its technology is novel enough that it could be licensed, but to my eye, I think Nimble TV will be facing an increasingly difficult future trying to implement its current business plan.

Other takes: The VergeMultichannel News, Light Reading

Nimble TV's explanatory video

19 July 2013

Virtual MSO - A Look at the Opportunity

On the heels of the Needham analysts Laura Martin and Dan Medina's report "The Future of TV" (.pdf link) come stories about Apple and Google planning to offer something that sounds like a virtual MSO -- a plan to offer a bundle which includes live channels direct to end users over the Internet. As my friend and former colleague Will Richmond notes, this story has flared up many times over the past year or so, with Sony, Microsoft and Intel famously among the potential cable disruptors.
Hopefully new virtual MSOs will not represent a new path into the home for poltergeists.
The Needham report provides an exceptionally clear-eyed look at the television ecosystem and makes a few points that I had not seen made as clearly anywhere else. It also provides a useful context to consider the opportunity for a so-called "virtual MSO".
  • Multichannel television is about 85% penetrated to households.
  • Most of the popular cable networks are controlled by a relative handful of major programming companies (Disney, Time Warner, CBS, Viacom, Fox, Discovery, Comcast/NBCU, Scripps, A&E and AMC).
  • The programmers bundle their channels together for sale to distributors.
  • To the extent that programmers are willing to sell their services to new providers, they will expect the new provider to carry all of their channels in the "basic" package and pay full "rate card" prices.
  • The existing multichannel providers have
    • superior pricing on content, and
    • less restrictive packaging terms, and
    • a much more substantial local advertising sales business which can take advantage of the local avails that cable networks provide with their service, and
    • their own pathways to their customers, so they can provide a consistent service quality. 
  • The major programmers are not interested in seeing cable as a whole become unbundled. It is not unusual for a programmer to require that a new distributor sign up many other third party cable networks as a condition of an affiliation agreement with a major programmer. 
  • Some programmers have restrictions in their affiliation agreements with current distributors that do not allow them to sell their services to over-the-top providers (or provide disincentives if they were to do so).
So, where does this leave our potential virtual MSO?
  • Entering a possibly saturated market.
  • Signing on to higher content costs.
  • Receiving little or no packaging flexibility.
  • Having a minimal ability to offset content costs with advertising.
  • Being dependent upon a third party (the consumer's ISP) to deliver the service with acceptable quality.
  • Being dependent upon that same ISP to provide the consumer with service with no bandwidth cap so that the substantial use of the service (i.e., watching television) does not require the consumer to spend extra on its ISP service.
  • Likely having to launch without some popular channels.
Some of the issues the new entrants will face are temporary, but some are more fundamental. With scale, the new entrants will likely improve their content costs and advertising sales businesses. The packaging restrictions limit creating a significantly different content offering. The service quality and bandwidth cap issues look thorny.

Not surprisingly, given these difficult tasks, the virtual MSO business is only being stalked by companies with deep pockets -- Google, Intel, Microsoft, Sony and Apple fit that bill. Perhaps they are willing to run this business on little, or no, or negative margins for a good period of time to establish it.

That list of potential entrants dovetails nicely with the only obvious unimpeded opportunity for the virtual MSO: to improve the television interface. I think are opportunities in this and I am not alone in this feeling. Apparently Intel has made progress on this front. The incumbent distributors' widely deployed set-top boxes with their grid-style electronic program guides are not especially helpful for consumers navigating hundreds of channels. The widely deployed set-top boxes with DVR storage in the consumer's home have limited capacity, are subject to failure and can rarely be accessed outside of the consumer's home, often they can only be accessed on the single set to which the box is connected.

The skills that some of these new potential entrants have also dovetail nicely with this opportunity: Apple makes great interfaces, Google is the leader in running the sort of enormous data centers that a cloud DVR would require, Microsoft has some of Apple's advantages and some of Google's (both to a lesser extent). Sony still makes great consumer devices and Intel's chips undergird systems for all of these players. For each, that's a good start.

However the intersection of the opportunity and the constraints may be small. It doesn't make sense to make a first-class interface and launch it with a low-end product. Meanwhile launching a high-end product with uneven quality of service and lacking some top channels might also be problematic and the threat of future bandwidth caps doesn't help.

Fundamentally, to sort-of channel Steve Jobs, if you can't offer a product that is much better than what is out there already, why are you doing it?

At the same time, the multichannel interfaces are a moving target. It is clear that the distributors know that their interfaces are not-so-good and that the DVR would be better placed in the cloud than in the consumer's home. Comcast's new X2 guide software, unveiled at last month's Cable Show, is working on both of these issues. Other distributors are making similar efforts, like Cox's FlareWatch product/experiment (see my prior post).

The launch of iPad apps, led by Time Warner Cable and followed by many other distributors, are another way the distributors are updating their interfaces and, this also suggests another path for Apple, Google, Intel and the others.

These apps have been ported to devices beyond the iPad. In the case of TWC TV's app, it is available on portable devices such as the iPhone, Android phones and tablets and the iPod touch, but it is also available on the Roku, a television-connected box and Microsoft's Xbox game console and is rumored to be coming to the Apple TV. Clearly Time Warner Cable is more interested in making its service more available and hence more useful to consumers than protecting the revenue stream from additional set-top box rental and additional outlet charges.

But isn't carrying the cable operator's app on an Intel-powered box a tiny victory for Intel or Apple compared to the huge win of creating a virtual MSO?

Perhaps it is, but looking at Intel's issue more broadly, the creation of the virtual MSO seems much less important. Intel does not have a strategic need to distribute video content. Intel does have a strategic need to sell more of its chips, which by and large are not used in cable set-top boxes, nor in the Apple TV or Roku boxes. Similarly, Apple and Sony are primarily in the business of making consumer devices.

If the operators will create apps for the boxes of Roku, Apple, Sony and Intel, it would not appear that there is the same need for these companies to create their own services competitive with cable, particularly if they are essentially relegated to providing me-too services.

Under this scenario:
  • The multichannel operator wins by making its service available on more devices, which inevitably will compete to make their boxes and interfaces more attractive, reducing the distributors' dependence on expensive proprietary set-top boxes which much be purchased, inventoried and supported and whose software tends to evolve slowly. The interface is still controlled by the operator since it has to authorize the subscriber (and no software developer would release an app that the operator won't authorize).
  • The consumer benefits by having the option to buy a relatively inexpensive Internet streaming box (some Rokus cost as little as $50) and not having to rent a cable box (effectively $14.25 monthly for me on Time Warner Cable's system in Manhattan -- see picture below).
  • The consumer electronics company has an easier time getting its box into a consumer's home.
1 additional outlet costs almost as much as HBO
To the extent that there is a more promising virtual MSO opportunity available down the road, Apple, Sony, Intel or whomever can then use its installed base of boxes to jump start that business. Famously, Apple did not make the first MP3 player or smartphone, they waited until what they could make was a material improvement on the state of the art.

While the Google TV box could employ the same strategy, that may not be sufficient for the company. After all, Google is primarily a services provider rather than a device provider, it is already in online video via YouTube and it has the deepest pockets of all. As the Diffusion Group notes, Google's search expertise could be bring a new paradigm to television navigation. Also, Google's experience serving up more relevant advertising might give it a leg up over the incumbent cable ad sellers, once it had meaningful scale, of course.

Another view, not inconsistent with mine: Jeff John Roberts, GigaOm

01 July 2013

flareWatch: Cox Goes OTT on Itself

Updated (2 July 2013) with numerous details.

Cox, a major US cable operator, has launched something that I believe is without precedent: an IPTV service that competes with its existing traditional cable TV service (Todd Spangler's article in Variety). Here are the relevant details:

  • Customer must purchase Cox's cable modem service
  • Cost is $34.99 per month (incremental to the cable modem service cost)
  • 97 channels are included with 60 HD channels
  • includes all local broadcast channels (update: ABCCBS, NBC, Fox, Uni, PBS, Ion, CW, etc. and, it appears, all of the digital multiplexes carried on the system -- more than 25 channels)
  • includes a cloud or network DVR with 30 hours of storage; update: playback only within the home
  • works with Fanhattan's Fan TV set-top box
  • does not incorporate Netflix or Hulu Plus (at least not currently)
  • is not available outside of the home
  • does count against the cable modem service bandwidth cap
  • cable channels include: ESPN, ESPN2, TNT, Disney, ABC Family, Fox Sports West, TWC SportsNet, CNN, CNBC, Nickelodeon, A&E, Discovery, Bravo, USA, TLC, MTV, Fox News and Syfy (update: also FX, TBS, WGN, MundoFox, QVC, HSN, MSNBC, Headline News, Galavision, BET, VH1, Weather, Spike, Travel, Food, HGTV, Lifetime, E!, Comedy Central, History, Fox Sports Prime Ticket, AMC, TCM, TV Land, Cartoon, Animal Planet, Speed, CMT, Golf, TWC Deportes, C-SPAN, C-SPAN2, National Geographic, Palladia, Velocity, The OC Channel, Cox 3/California Channel). This lineup appears similar to a typical expanded basic with the addition of a few purely HD services that are usually bundled with expanded basic for customers with HD boxes, namely Palladia and Velocity.
  • update: free on-demand is "coming"
demo image of the flareWatch interface
Some thoughts:
  • Cox is certainly taking the position that the cable TV rights that it has are suitable for this IPTV service. While it is new for an operator to offer IPTV service as well as traditional cable on the same system; it is not unusual for operators to offer IPTV service (AT&T and Google Fiber offer IPTV service exclusively; many other distributors offer it on some systems).
  • Why are any of the channels carried in SD?
  • Typically cable operators break out the broadcast channels in a separate tier from the cable channels to minimize their copyright royalty payments (e.g., a $20 basic broadcast tier is available, then a $40 cable program service tier --that 90%+ of subscribers purchase -- is available above that -- copyright fees are based on the $20 price, not the $60 price). Is this package subject to a different (or no) copyright royalty payment scheme?
  • This package appears to contain most, if not all, of the most expensive cable channels -- usually cable operators are trying to create new packages which exclude those services (like Cox's own TV Economy package).
  • What is the complete channel lineup? (I have searched cox.com, but haven't been able to find reference to flare or flareWatch yet). Update: flareWatch has its own website that does not mention Cox, except in the fine print at the bottom. Is Cox's brand name an impediment to selling the service? The branding of the service is inconsistent. The URL for the site is watchflare.com. The service name is styled "flareWatch" on the site and simply "flare" on the demo.
  • If the target for this service is customers who have Cox Internet service, but do not have Cox TV service, why is the lineup so traditional in its selection of services?
  • Update: the consumer has to buy the box (and remote) for $99; live TV pausing is not a current feature of the service (from Rich Greenfield's blog post includes video demonstrating the -- notably easy -- sign-up process and captured video of the flareWatch promotional video)
screenshot of flareWatch sign-up screen with pricing

Cox's site for "flareWatch" -- watchflare.com (includes a :34 unembeddable video)
Michael Greeson's take (The Diffusion Group) with some interesting notes about the price point and services included