European Technology Investor Durlacher Foresees The Death Of The TV Channel

21-Dec-00

Durlacher have just released a comprehensive report on the implications of digital personal video recorders (PVRs), devices that have recently been launched in the U.K. market in an early form. The report's conclusions are radical - rapid uptake of PVR type devices will result in profound impacts on the broadcasting industry, including the eventual death of scheduled TV channels in the form we know them today. Durlacher argues that mass home storage technology will rank amongst the handful of the most significant developments of the next decade in broadcasting. Within four years, PVR users will consume the majority of their TV content from the local storage box rather than directly from the TV channel.Durlacher is nevertheless cautious about the likely market success of early PVRs, and believes that pioneers TiVo and Replay are likely to exit the market as independent players, possibly being acquired by an existing major content or technology company.""PVRs will be widely adopted and a major change in the industry is now in its earliest stages of development"", said the reportís author, Jerel Whittingham. Jerel is a Senior Consultant at Durlacher and a former advisor on technology strategy for the BBC.This is the first report to systematically set out the full range of strategic and investment implications for the various affected groups including consumers, broadcasters and technology providers. Durlacher is already well known for its expertise in the Internet, software and mobile commerce arenas. This report represents the first result of Durlacher's ongoing investigative push into the industry's next wave - the convergence between the PC/Internet/technology industries and the ""creative content"" industries including music, film, television and entertainment. The report will form the basis for further exploration of rich media content, broadband and next generation convergence.While unheard of until relatively recently, PVRs have become possible largely because of the increasing capacity and diminishing cost of hard disc capacity, the unit price of which has fallen by a factor of 100,000 in 15 years and is still falling. ""When you look at current PVR devices, sophisticated though they are, think of the early brick-sized mobile phones - it's not yet that elegant or convenient and price is an issue, but it's clearly the start of something big. It takes a real leap of the imagination to think what a device with 100 or 1000s of hours of easily accessible storage will mean, but that is rapidly the way the technology is going"", said Whittingham.The report concludes that PVR functions are likely to become an increasingly standard feature as the industry moves toward digital TV and the functionality is incorporated into set-top boxes. EU penetration could reach as high as 50 percent by the end of 2007 and 75 percent by 2010. Associated revenues, from a variety of content and services, in the range of £40 to £60 billion are possible over the same ten year period. Durlacher sees the PVR as the first imperfect generation of the ""home media server."" In its mature form, this will be used for a range of consumer services, as well as media content from a variety of sources and will represent an important gateway into the consumer home.Some of the report's observations include the following:- Broadcasters, pay-TV platform controllers and content providers will all try to retain the highest possible degree of control in key areas such as advertising and content promotion and will not surrender current revenue streams without a fight. ""Up to now, views on PVRs have tended to polarise between the idealistic and the cynical - the consumer in total control of their TV experience versus major networks controlling their usage or refusing to support PVR services. The reality will be a compromise,"" said Whittingham. - As the majority of programming is recorded in the home and accessed at will, broadcasters' current business models and revenue streams will be threatened and the role of the traditional channel will be undermined. However, equally, the functionality of broadcaster's systems and the range of services they can offer will be greatly enhanced, allowing the provision of a form of video on demand service which Durlacher has christened LVOD (local video-on-demand). Content is broadcast in encrypted form and stored by default on the hard disc for instant access. - True video on demand services (VOD) were previously considered to need expensive wire-based broadband systems. While conventional server-based VOD is currently proving uneconomical and will be available primarily in urban areas, LVOD could be universally available - anywhere that receives a broadcast signal.- Durlacher predicts that TV will become more like publishing and the internet, where content is ""published"" and then promoted over a time window. The role of linear scheduled channels will drastically diminish. The publishing analogy will extend to TV advertisements too. Durlacher foresee a reduction in long ads contained within the content stream, and the growth of shorter ten-second ""blipverts"" and more customized ads, complemented by more detailed ""infomercials"" at the request of the viewer. The report also highlights the many issues for policy makers and regulators in areas such as personal privacy or how to enforce the watershed if programs can be accessed at any time. The PVR could also significantly affect the rate at which the national move to digital broadcasting is completed, a key issue for a government keen to release spectrum and cash tied up with current analog broadcasts.The Durlacher report on this topic, ""Digital Local Storage - PVRs, Home Media Servers And The Future Of Broadcasting"" will be published on December 11, 2000 and can be downloaded for free from www.durlacher.com.

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