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Sunday, August 20, 2006

What's in the living room of the future?

Video is coming from new sources, from DVDs, consoles, digital cameras and even mobile phones. We are now moving to a situation where televisions are no longer the central and only consumer entertainment object within the living room. What else is invading this space? What's going to be in front of our sofas?

Displays

There is ongoing competition between three different technologies for the mainstay of any digital living room, the display.

These are the Plasma screen, the LCD screen and the projector (and a resulting screen). Note the use of the words 'screen' or 'display' rather than television. There is a definite trend for televisions to be used as screens. The role of decoding television transmission is rapidly being delegated to distinct, separate boxes.
Tuning into external signals (television) is rapidly being delegated to boxes (Sky+, freeview, media centres). Internal signals such as DVDs have traditionally been delivered from external devices too.

Plasma Screens

To be brutally honest, the average consumer doesn't really know the difference between the two competing flat screen standards. Overall, plasma screen has one main advantage over LCD screens and that is price. On a 'price per square inch' basis, plasma wins at the moment. However, they have an ongoing (though slowly being solved) problem with 'screen burn'. This is a major issue as people start shifting towards media centres which will need to be able to surf on the Internet. Wanting to play computer games will also impose further limitations on the people who want to use their screen for games.
Power efficiency is not very good at all - Fujitsu are currently attempting to run some negative PR about the efficiency of the screens. They cannot achieve levels that can beat CRT, let alone beat the LCDs.
Image quality is supposed to be strongest on these screens, as they have the ability to get the strongest 'contrast ratios'. The contrast ratio tells you the difference between white pixels and black pixels. LCD screens tend to be around 500 whereas plasma screens will be around 3000. This leads to more impressive colours, if you believe the marketing blurbs...

LCD Screens

These screens are the most reliable and tend to last the longest, having a very low tendency to suffer from screen burn. LCD is the most price efficient for smaller screens, but they are having difficulty competing with the plasma screens on the larger sizes.
In terms of power efficiency, LCD screens win hands down. They are far more efficient than the average CRT (traditional TV screen) and manage to thrash the plasma screens.
Image quality is not as strong as the other two, however whether the quality is detectable without specialised equipment is a very good question. I strongly suspect that most people will not be willing to pay extra for the plasma screens.

Projectors

Some might consider a projector a bit of overkill for the average living room. Though a projector can be a more practical solution than a 42" television.
Projectors sit somewhere between LCD and Plasma in terms of picture quality, though they can be the best if you are willing to pay eye watering amounts of money.
Costs tend to vary hugely. If the consumer is not worried about having enough resolution to run HD content, they can get a decent sized projector without spending more than LCD screens.
Projectors will more than likely become a more specialised choice as they will not be a 'space saving solution'. Reliability issues can come into it as projectors can get through their horredously expensive bulbs on a very regular basis.

Video Delivery

PVR

Sky+ penetration is growing steadily and heavily. The popularity of the PVR product is very impressive, and does not seem to be something consumers are willing to give up. Sky report seeing their retention rates leap significantly with the introduction of their PVR service. The fact they are willing to subsidise the introduction of the PVR to UK households indicates we will see the majority of homes with this device by the end of the decade.
BARB estimate that PVR penetration will rise to 78% within the next ten years. This is particularly interesting as it predicts that time shifted viewing will still only consist of around 20% of TV watching by this point.
PVRs are very simple to install and extremely easy to use. These two factors are the most important in terms of mass consumer adoption. It is very difficult to see a way in which PVRs, or something very like them will not become the dominant method of watching television. Products are coming to market which combine DVD functions with PVRs, allowing people to have a one stop shop for their video needs.
HDTV will result in more expensive PVRs, but shouldn't produce any signifcant changes to these devices.

Media Centre

Although media centres are currently being touted as the future by Microsoft, the costs of the systems are prohibitive at the moment. Microsoft (and the hardware companies) are looking to people to invest an extra £1,000 in a 'home entertainment system'. Since this is being targeted at people who have already invested in a large screen, companies are looking for a certain class of consumers. Suspicions abound that these consumers will not be found in large numbers.
Media centres offer people the opportunity to combine their PC and therefore internet browsing with the television. This is an interesting proposal, as many research papers (including Touchpoints) have pointed out that many people watch TV while using their PCs for other tasks. Will Microsoft expect people to use more than one computer in their living rooms?
HDTV will be a necessity for the media centres, as many of their functions will not work well on normal, non-HDTV screens.

Consoles

Video doesn't have to be TV or films, it could also come from consoles. Video game usage among younger people is increasing, and the original 'gamer' generations have now reached the ages where they have serious amounts of spend behind them. Can the console makers convince consumers to spend large amounts of money on their products?
Already people are spending more on games than on cinema. A US study found that a significant proportion of men are spending more on gaming than on music. The average annual UK music spend is around £170. Will we see this being cut into to go towards games?
Both Microsoft and Sony have two strategies available. They can either look to incorporate their 'media centre' product into the new generation of computers emerging, or they can look to upgrade their consoles. The new generation of consoles have the capability to fulfil all the functions of a media centre, should their manufacturers choose to upgrade them.
The most likely scenario will be that the manufacturers will give the media centre another 18 months (until a while after Windows Vista has been launched) to see if they can make more money by selling the more expensive platforms. If this cannot be achieved, then they will move towards providing the necessary functionality on their proprietary platforms.
I suspect that we will see some kind of package come out for the consoles which will allow them to be used as 'digital hubs'. Sony are already pushing the PS3's ability to play the new blu-ray disks. Will they start enabling their PS3s to take TV signals and become PVRs? Will they give the PS3 a fully functional web browser?
Some of the answers are visible from Microsoft. They are trying to extend their 360 brand. Their online presence has recently rebranded to 'Windows Live', deliberately reminiscent of the XBox live. XBox live is one of Microsoft's few web successes (which wasn't bought) so it seems natural that they want to build on success. Plans to sell advertising on the XBox live system would also start their ability to fund an expansion of this service to cover a wider range of content.
Consoles offer the manufacturers a chance to roll back the development of the web and begin to offer 'walled garden internet'. Only allowing approved (or paying) partners within it. This content rich network would then be milked for all the advertising cash they could justify. If any of the three companies (Nintendo could get into this game too) can attract a good number of people to their network, we should see some interesting media opportunities.

Internet (IPTV)

IPTV is a serious proposition. Watching TV over the internet is something which can already happen (BBC's 'watch again' has been in testing for a long period of time). Internet delivery systems for film and video are under development from Amazon, Apple, Microsoft and other companies. Internet delivery requires large amounts of bandwidth to work effectively. Downloading large amounts of video content will result in large costs for the broadcaster and, potentially, for the consumer. Many consumers have deals with their ISPs that limit the total amount they are allowed to download a month. IPTV will be impossible to realise while these caps remain in place for the majority of consumers.
IPTV is a technology that covers a large range of possible solutions. There are current systems in place, being run by Homechoice, NTL and Telewest. Although they currently have a large amount of UK households with the service, details are currently sketchy as to usage.
The homechoice platform is of most interest, as it not only represents a live implementation of IPTV but also shows a possible server \ client implementation of the media centres. This means the homechoice servers (currently physically installed in the telephone exchanges) will be able to run web browsers for living rooms.
The fact that some of the services allow people to watch programmes whenever they want to makes them similar to PVRs. There are consistent rumours that the BBC will introduce a system similar to 'Listen Again' on an IPTV platform.
DVD playing will also be threatened by IPTV. A physical copy of films will no longer be necessary. Many consumers are now comfortable downloading their music. They will be able to download films. Currently, cable operators offer their users the opportunity to 'rent' movies which are then playable for the night through their platform. The rise of Netflix shows there is demand for easy and flexible film hires.

Conclusion

The next major battleground for consumer electronics will be the living room. There are a number of different solutions to the wants and demands of the modern consumer. The television battleground will end with LCDs on the top, though there will never be a uniform technology again in the same way that CRT once ruled the roost. There is constant innovation within this field and we should expect to see new technologies being able to deliver visuals in the near future.
The method of receiving the signals is where the majority of uncertainty lies. IPTV has the potential to deliver the majority of people's video content, though it will be necessary to develop enough infastructure to deliver the required bandwidth. In the short term, however, the PVR will be the most used solution before the rise of IPTV.
Consoles represent an attractive route into the living room for the major players. Sony is definitely using the PS3 as an 'advance guard' into the living room. Once the PS3 has been bought, consumers will then have a need for a HDTV. Microsoft hope to keep their operating system at the heart of home users, and so will aim to start extending the possibilities of their console offering.

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