August 8, 2008

Storage Is King

The battle for supremacy among content providers is coming down to video storage and retrieval.

By Hugh Carter Donahue, Ph.D.

Developments in licensing, an Appeals Court ruling, the launch of an Internet movie viewing service and new downloading functionalities for movie and gaming consoles point toward a future in which new video storage and retrieval capabilities will determine winners and losers in content industries.

First, the licensing: LG Electronics and Funai (manufacturer of brands including Emerson, Magnavox, Philips and Sylvania) came on board with tru2way licensing for interactive cable programming, CableLabs announced in late July. They join ADB, Digeo, Intel, Samsung and Sony in a memorandum of understanding with the six largest cable multi-system operators to place tru2way technology in televisions, navigation devices and cable systems.

By adding LG Electronics and Funai, CableLabs builds inertial advantage for tru2way as the middleware throughout America’s cable systems. With each additional digital television and navigation device equipped with tru2way functionality, content developers will have that much greater reach with their programming, and consumers will have more programming and more reasons to stick with cable.

In New York in early August, the U.S. Court of Appeals for the Second Circuit ruled that consumers’ storage of up to 45 hours of video programming remotely on Cablevision’s infrastructure is legally permissible and does not violate copyright law. While movie studios and broadcasters may yet appeal the ruling to the Supreme Court, delaying consumer availability of the service until the issue is settled, the cable industry would have much greater flexibility with lower unit costs and greater competitive advantage over telco and satellite rivals should the ruling be sustained or the high court refuses to hear an appeal. (The ruling riles advertisers, too, for remote storage function enables consumers to elide commercials.)

On the Internet, KlickableTV launched in early August with functionality to hyperlink video on the Web and provide greater efficiency to advertisers. In this instance, the storage and retrieval technology enhances advertising.

In the gaming and movie console world, Sony announced in July that greater numbers of movies will be available for download on PlayStation3 units, and Netflix announced that subscribers will be able to receive streaming content on Microsoft Xbox 360’s this fall. The bigger picture on the consoles is that interactive gaming, enabled by the units, will take consumers away from video programming. Yahoo! Games is readying advertiser-supported downloadable games by the new year, which translates to more competition for cable, satellite and the telcos.

Amid an increasingly fragmented content market, industry players of differing scales and sizes are employing specific digital technologies and testing existing copyright law to win competitive advantage in their battles for consumers’ resources. Much as Chou En-lai remarked in a vastly different context (regarding the success of the French Revolution), “it’s too soon to tell” which players will ultimately emerge as dominant. Certainly, tru2way seems off to a great start. Cablevision at this moment has an advantage and, should it prevail, the cable industry as a whole will, too. Time Warner Cable is saying as much. KlickableTV seems genius itself, worthy of Emerson’s better mousetrap. And, the movie and gaming consoles may do as much, if not more, for gaming than for entertainment content.

Hugh Carter Donahue consults on and analyzes communications policies and applications. His most recent story for Cable60 was “Tru2way and the Triumph of Industrial Design.” His article “Navigating Navigation Devices” was published in CableFAX Daily in April 2006 (volume 17, number 82).