In September 2002, Intel announced a reference design for a “digital media adapter” that aimed to connect appliances like PCs, stereos and TVs wirelessly, with the hopes of bringing TV programs and movies stored on the PC to the TV screen and music files on the PC to the stereo – we’ve come a long way since then.
Last week found the players in the market making new deals, possibly shifting allegiances and developing yet another drastic new approach to the relationship between the Internet and content on the TV screen. This is one of the fastest growing and changing sectors and it has grabbed the current attention of the market with both hands. The weekly iPhone-killer announcements have been replaced by new companies popping up each week that can deliver Internet content to the TV in a variety of new ways, so here are some of the most recent changes in the market.
Roku, maker of the $99 set-top box with an affinity for streaming Netflix movies, has added the ability to purchase and download more than 40,000 titles from Amazon.com’s Amazon Video On Demand (VOD) service.
Netflix must be having an “Et tu Roku?” moment right about now.
The deal with Amazon will include new releases, some of which would have taken longer to get through the Netflix streaming service alone. The service also adds a pay-as-you-play model, where users have the option of paying for specific content instead of opting for a subscription service.
“The addition of Amazon Video On Demand is the first step in our plan to create an open platform for Internet content distribution direct to the TV,” said Roku CEO and founder Anthony Wood.
The Roku box can now stream rented and purchased content as soon as the user pays, storing the content online using the “Your Video Library” from Amazon. This storage system is most likely why Amazon’s VOD service was the first rental/purchase service to be added to the box, which lacks a hard drive.
Roku has gained a lot of popularity through its offering of the Netflix service, but the Amazon addition increases the appeal of the box immensely. Amazon and Netflix will have some overlap of content made available to the box, but even if Amazon carries everything that Netflix offers it’s still bringing around 38,600 new movies and TV show episodes.
“After spending significant time with the Roku box,” said Forrester Research analyst James McQuivey, “I have concluded that the Roku is still the box that delivers the most punch, especially considering its price.” Roku, according to McQuivey, only needs to add a service like Hulu or Yahoo’s Widgets to its box to completely cement its place as the market’s best.
The odds of cable and satellite subscribers being able to cut the cord and still get subscription-free movies and new shows on their TVs are about one a zillion, perfect odds if you’re ZillionTV.
“This is all about the TV,” Zillion’s chief engineer Mike Catalano told CNBC. ZillionTV says it will soon be able to introduce a new service that allows cutting the cord, announcing that it has recently struck deals with some Hollywood movie studios and TV networks. So far on board are the likes of Disney, NBC Universal, 20th Century Fox, Warner Brothers and Sony Pictures. These companies and Visa all have some equity in the service. Mitch Berman, Zillion CEO, told CNBC that the aim of his company and its device is to build the largest content system ever conceived.
First Hulu and now ZillionTV; looks like NBC Universal and Fox are putting as much faith in new distribution as they are in cable. Zillion’s plan is to offer streaming movies and TV shows through broadband connections and its Z-bar set-top box. The Z-bar is Wi-Fi enabled but also can be connected with an Ethernet cable. There’s also a remote that looks to be a cross between a laser pointer and the remote for Nintendo’s Wii. The Zillion service, currently in beta, is hoping to come out through an ISP sometime in the fourth quarter of 2009.
The ZillionTV package is expected to cost under $50, below the price of similar boxes, and will offer access to up to 15,000 TV shows and movies, available through three different payment models. Under the first option, users can pay a small rental fee for a movie or TV episode and see it commercial-free. Users can also pay a little extra and purchase the content. The third option is for users to see the content for free with targeted advertising.
Advertising for films will come before and after the movie; the company promised no interruptions. For TV shows, the advertising will come during the built-in breaks, but the company says users will most likely see 50% fewer ads than they would see on traditional broadcast television. Viewers select advertising categories they are interested in to hopefully give a better return to advertisers.
ZillionTV hopes to eventually have interactive commerce, allowing users to purchase items directly from the TV set, as well as a loyalty program to reward viewers and those who interact with advertisements. This is where Visa comes in, saying that it will power the e-commerce engine that it looks to make a one-click process.
“People are tired of paying for content that they don’t use,” senior VP for ZillionTV Patrick Gauthier told CNET. “They don’t want TV by appointment or TV by bundling. We will offer them another way to view TV while also offering content owners and advertisers new ways to monetize their content.”
ZillionTV is an interesting concept, but it has a long way to go. Zillion plans to sell its service through an ISP, but it must be looking at relatively small ones, as more and more broadband service providers are selling their own subscription TV services. Unless Zillion is planning on cutting them in on the cash, it seems like a bad place to start.
Zillion has said its service will get more ISP customers to sign up for higher-speed services with more bandwidth allowances, but we wonder if people will abandon current fixed-cost services for one with a fluctuating cost. Zillion must have discovered an ISP that’s willing to use the ZillionTV service instead of having to build its own system from the ground up.
Zillion says ISPs will give it dedicated bandwidth to deliver its content, which will give it an edge over other streamed services like Netflix and Hulu.
The titles it offers are dwarfed by some other services, including Amazon’s 40,000 VOD titles. Other services, including Amazon’s, are available on existing hardware.
ZillionTV also currently has no deals to offer live TV broadcasts, specifically sports, which is a huge draw for cable and satellite TV subscribers. It is also unclear if the current deals it has will include things like local news or other local programming. With companies like Verizon and Comcast pumping money into TV offerings, it seems there will be few big outlets left to give Zillion access to this content.
While the ZillionTV service could be appealing to users who are looking to cut the TV subscription cord and not the Internet, it’s another box from yet another company that’s hoping on another deal to help it get on top of the TV set next to all those other boxes.
Set-top boxes are essential to this market and it’s where most of the innovation and deals will come from. The installed base of TVs is huge, and with the sales and recent price cuts of HD TVs consumers aren’t going to be running out to buy the latest Yahoo Widget-enabled TV set.
Another thing that will slow down the uptake of new TV sets is that TV makers are likely to charge a very noticeable premium for these new Internet-based functions over the next two to three years – everybody needs a profit margin boost right about now.
Multi-service boxes, which Roku has joined the ranks of, will have a large advantage over systems like Apple TV – which actually was a multi-service box until an update crippled the Boxee application. In the UK, the Canvas box coming from the BBC, ITV and BT will be a major factor for the market, with a very easy shift into the European and US markets if it can pick up local content.
The unknowns here are which companies might get into building their own TV sets. Everyone said Apple should avoid building a smartphone, so it could be the wild card in the TV maker market. Microsoft probably won’t be building its own set, but the Zune platform will be making its way on to TV chipsets, eventually. All of this is happening very, very quickly, and this could be exactly why the US cablecos and DirecTV are looking to develop their own Hulu-like service.