Editor's note: The following transcript was recorded at the iMedia Summit at Amelia Island, Florida in May. Jeff Minsky is director of emerging media platforms, U.S., OMD.
Jeff Minsky: What's really happening here is that currently you have satellite and cable companies providing the video content into your home, but that will change -- that fiber optic network that Verizon has spent millions of dollars driving to the house and SBC has driven to the curb and compression technology from the curb to the home -- is going to start rolling out later this year with something called either IPTV on the SBC side or FIOS on the Verizon side.
So what that really means is that the technology is there that's enabling a huge, almost unlimited amount, of bandwidth to come in your house. A demonstration that was shown at the Consumer Electronic Show recently from Major League Baseball was the ability to watch six major league baseball games simultaneously with a stream of data coming in and two-way capability so you can be talking with your buddy over a tv videophone and talking about the particular game you're both watching.
So that's what's going to happen. This is not: Is it going to happen? This is going to launch at either the end of this year -- I think there are some rights' issues that may hold it back until mid next year, but this is actually going to occur now.
And the definition of communication expands because the satellite companies are going to be offering DVRs. The cable companies are pushing hard on the DVRs and the VOD, in particular because that VOD is their one-up right now on satellite.
The effects of VOD, the changing consumer behavior in a VOD environment, in a DVR environment, are extremely dramatic in terms of what the end user and the consumer media usage habits are going to be. Add IPTV into that mix, add VOIP -- voice over IP -- a tremendous threat in the long term to the current cellular telecommunications telephony companies, in particular because Comcast has made it a priority to hit over eight million subscribers in the next five years. If we put that in parameters, Vonage currently has about 450,000 to 500,000 to VOIP. Comcast has publicly stated they're looking to get to eight million subscribers in the next five years.
What does that mean? It means videophones. It means the potential to advertise through a videophone to a consumer.
Last week at E3, the new platforms were announced, the new video game platforms were announced, the PSP, the Xbox 360 and Nintendo Revolution.
These are not video game devices. We're talking about convergence -- these devices are entertainment hubs. They're going to be able to take content and store it on your hard drive, on your media server, whether it's a Microsoft Media Center or other type of server. They're going to be able to pull information from the internet, pull content from the internet, and the user will be able to watch this on whatever type of screen and play with this on whatever type of screen they want.
Change is occurring extremely rapidly. If we look at HDTV, we see a slow growth of HDTV, except now we start to see in 2005 we're about 5.5 million homes with HDTV. Looking at 2006, we more than double, and then 2007, 21 million -- the reason, of course, being that the FCC has mandated or Congress has mandated that all over-the-air broadcast becomes digital so they can get the spectrum back by 2007. There's a lot of discussion about when the real end date is going to be. The fact is it's mostly likely going to be after 2007.
But the consumer is already starting to prepare for that. To a great extent, it's also a matter of pricing. You can get a fairly decent HDTV set for about $1,000. It's not the top of the line, but it's not the bottom of the line either, and in general, you're out $3,000 on the HD. And the programming options continue to increase. Many more broadcasters are broadcasting in HD. It's not everybody, it's not every single program, but it is increasing rapidly.
It took TiVo seven years to get 3.5 million subscribers or set-top boxes out in the field, 80 percent of which are Direct TV households. The MSO started getting into the business, and again, right now TiVo this year is still hovering around three, 3.5 million households, but we're already at 10 million DVR households. Most of this, with the exception of the fact that TiVo did cut the deal with Comcast to be part of the interface for the Comcast DVR starting around mid 2006, most of this growth is going to come from cable and satellite operators.
VOD is another area. Now, there are VOD-enabled households. This is not VOD usage. Let me make that distinction because VOD is at 22.9 million this year in terms of enabled, but people still really don't know how to use VOD. There are segments that are using it. As you start to learn, your usage increases dramatically, but for those who haven't gotten the VOD thing yet, it is something that is going to be pushed pretty heavily, like I said, as a competitive factor against satellite by the companies.
On VOD, for example, Comcast made it an investment in MGM and Sony film libraries. So they can give up to 200 films a month for free -- not pay-per-view, but for free -- to the consumers to watch. So a couple of weeks ago, I couldn't find anything to watch on traditional television, and I went on the VOD and I saw "Brian's Song." Great movie. You know, older film, but great movie, and there's two hours of my time that is no longer in the universe of a potential sea of commercial television. I'm now in a separate universe altogether, still on the TV device.
The rate of change, like I said, is strong. Look at these numbers in terms of rates: 136 percent change; 125 percent for HD; DVRs, double digit growth; VOD, double digit growth but slowing down in terms of enabled households. Again, I believe usage is going to dramatically go up.
And broadband households continue to grow. One of the big takeaways -- when I give this presentation to clients, I'm very, very adamant that if we're talking about emerging media, the medium that has already emerged to a great extent is the streaming video and streaming audio broadband universe.
Really, there is a monumental shift right now in media dynamics. The consumer is in control. They do not have to watch what's being pushed down to them. It's not about three networks, five networks, 50 cable channels, saying, "Here's what you can watch." It's about taking the ability to get content from anywhere and putting it on your screen. Technology is there to help and enable them, but it's only really the beginning.
There is this concept, media server, media concierge, whatever you want to call it, about a device that lives in the home that finds content you want or that you use to find content that you want, and brings it onto your TV screen.
This exists. There are different devices currently that have fulfilled the application on this Help Wanted Ad. Microsoft Media Center is there and is starting to gain some traction. I believe there are about two million to three million units in the U.S. at this point and growing globally as well.
TiVo is becoming much smarter. For those of you have TiVo to Go, you now can take content that you've recorded on your TiVo, put it on your laptop, and watch it during flight. And one of the key things to remember is the DVR number. I'm not sure if I even kept it in here or not.
There is a perfect storm brewing. It's not here yet. We're not talking about a monumental shift in television and the upfront and all the network viewing today. But we are talking about it being on its way and the potential.
So here we have VOD. We're removing audience from the commercial viewing potential. DVR owners skip commercials 80 percent of the time when viewing recorded programming. Now, we're talking about five to eight percent penetration currently of DVRs in terms of U.S. households. So at this point, it's something to watch, but no one's considering it the end-all, be-all threat at the moment. It's those growth numbers I showed before that have the attention of clients, that have the attention of the networks.
Eighty percent of the time, when viewing recorded programming, they're watching less than 10 percent of the ads. DVR owners view recorded programming 43 percent of the time. So half the time, if you have a DVR, or a little bit less than half the time, you're watching the programs through your DVR.
Now, some of the Forrester and Jupiter studies that have come out have reinforced the fact that people aren't skipping the commercials because they don't like commercials. They're skipping commercials because they want their time back. We've over cluttered on television. We've taken up too much of the consumers' time with advertising.
They love the programs. In fact, Nielsen is going to start tracking the television DVR households next year. They love their programs. But Nielsen's going to be tracking program viewing. They're not tracking commercial viewing. So they'll tell you how many people watched the program live, how many people watched the program within a 24-hour period, and how many people watched the program within a seven-day period. And that's great, but that doesn't answer the question of how many people are viewing the commercials.
The other factors here to look at -- the home theater. I believe the home theater environment, the fact that you're spending $2,000, $3,000 for a 57-inch high def, plasma, LCD or DLP, with a Dolby 5.1 surround sound system, is going to change the actual viewing habits within the household. I believe that with a low-cost entry of being able to watch videos, either through NetFlix to your TiVo, through pay-per-view, or through buying a DVD for less than $10, $12, more cinema theatrical viewing is going to occur in this environment. So that again affects the overall viewing.
Then you have the Nielsen Arbitron Personal People Meters that are coming out that will reshape some of the viewing habits and will redefine exactly what programs people are viewing.
So you have all this happening, and if there's one takeaway today, keep in mind it's not one thing changing the marketplace. It's a convergence at this point in time of market forces, of technology, of these different aspects that are going to impact television viewing habits. Is television dead? Not by a long shot. Is a 30-second spot still going to be king for a while? It will.
But some of the technologies out there, especially when we hit 30 percent penetration of DVR, which could possibly occur within the next two to three years, are going to impact the way we look at television buying and television planning.
Tomorrow: examples and explanations of iTV programming, and the issues with DVRs.
"Comcast Doesn't Give a F*ck"
This video is making the rounds again thanks to its recent posting on YouTube. Warning: Explicit language (not for the faint of heart).
Pet heroes are the best heroes, no?
Get your tissues ready. The bonds between humans and animals can really be amazing, and these will definitely make your heart swell a bit.
Siiiiiingin' in the...cereal.
The Slo Mo Guys don't have a monopoly on slow motion videos. YouTube user SteveKardynal (who has some real gems in his library of videos) has some fun with food in a video he made to help raise awareness and money for the charity Action Against Hunger. A good video for a great cause.
Written by Associate Media Producer Brian Waters.