Inside the ultra-high-speed wireless home wars

The clear winner of the home networking wars of the last few years has undoubtedly been Wi-Fi. The sheer number of Wi-Fi embedded devices, from laptops to smartphones, is being increasingly joined by pack of new consumer electronics device categories with Wi-Fi, such as Smart TVs and OTT set tops, which means the technology isn’t going anywhere soon. But it’s not without its limitations, and a pack of new technologies could serve as more capable replacements.

How Content Bundles Could Make Cord Cutting Mainstream

While over-the-top video has made huge strides over the past few years, those cutting the pay-TV cord are still, by and large, early adopters.

With the high-prices of cable and the rapidly expanding choice of content available online, why exactly hasn’t the mass market started to cut the cord? Because for all the talk about the cost of pay TV, most people really like the content they get on their set-top box. It’s reliable and easy, much if it’s exclusive and there’s a whole lot of it bundled together.

And it’s that bundle that really matters, both in the world of pay TV and, believe it not, over-the-top.

In fact, it’s the bundle that’s responsible for Netflix’s success. What consumers get with a Netflix Watch Instantly subscription is a whole lotta perceived value by having access to tens of thousands of titles, all bundled together, for a low subscription fee. Hulu is built on a similar concept.

When I predicted last December that 2011 would be the year of the virtual video operator, what I was really talking about the bundle. In other words, 2011 is the year someone — Apple, Microsoft, Google or another company — finally brings a bundle of channels to over-the-top that looks, smells, and even tastes like a pay-TV subscription.

Judging by the news this week, the race to bring that bundled content over-the-top to the TV screen is on. Apple scored a big win, bringing perhaps the second most successful OTT paid service to the Apple TV in and NBA subscription services.

There was also talk this week of Microsoft’s renewed efforts to bring IPTV services to the Xbox, and also a possible new bundled content service platform. This follows up last year’s rumor that Microsoft had been in discussions with media companies to create a virtual service offering of video channels in a subscription package.

For both, it’s all about the bundle.

While economists have long touted the benefits of bundled goods and services and cited the Internet in particular as the perfect distribution channel for  bundled content, many cord cutters have pointed to the expensive bundled cost of pay TV as the reason for their cutting the cord.

But what both Apple and Microsoft understand is that the bundled-goods theory still applies in the world of over-the-top video, because an irrefutable law of consumer behavior dictates that they will gravitate towards perceived value. Sure, content-bundles in OTT may be narrower than the huge array of linear content channels providers in the world of pay TV (such as, say, a subscription to a season of live baseball games), and cheaper, but they are, in fact, still bundled content goods.

So don’t think OTT is going backwards as it begins to resemble, in some small ways, pay TV over the next few years. What’s happening is that the big-players want to push beyond early adopters, and they understand the content-bundle is the linchpin in making cord cutting a mass-market phenomenon.

Question of the week

How important are content bundles for OTT?

IFC Dips Its Cinematic Toe Into Subscription Streaming

While it won’t move the needle much on its content library, IFC Entertainment announced yesterday that it will offer 53 films through Netflix’s (s NFLX) Watch Instantly streaming service, reports Variety.

True, that’s not a very large number, but it marks the first time IFC is providing its content to a subscription streaming service. Up until now, the company has placed films from its 300-title library on EST destinations like Amazon (s AMZN), iTunes (s AAPL) and Blockbuster (s BBI).

IFC titles heading to Netflix’s streaming service include Errol Morris’ The Thin Blue Line and John Sayles’ Return of the Secaucus Seven.

As we’ve written before, Netflix’s Achilles’ heel is its streaming content library. Though it has over 17,000 titles, it needs to make sure that service is robust enough so that the number of subscribers using the service keeps growing. Check out Om’s recent talk with Netflix CEO Reed Hastings at our recent NewTeeVee Live Conference for more on his company’s streaming efforts.

Separately, though we didn’t see anything official announced, it looks like Netflix also just got a whole boatload of Saturday Night Live content in this week, including seasons 1 – 5.

To learn more about streaming directly to TVs, check out the report on The Evolution of Over-the-Top Video over at our subscription research service, GigaOM Pro.

Netflix Starts Shipping PS3 Discs

Netflix_PS3_1Netflix (s NFLX) has started shipping the discs required to stream its “Watch Instantly” movies on the Sony PlayStation 3 (s SNE). According to a corporate blog post today, Netflix VP of marketing Jessie Becker said the company sent out PS3 discs to 100,000 Netflix subscribers who requested them. Becker went on to say that after Netflix “tune[d] a few more details,” everyone else who requested a disc would receive one in the next couple of weeks. Users will have to use the special disc each time they want to stream Netflix on the PS3 until the service can be integrated into the console hardware.
During its Q3 earnings call, Netflix CEO Reed Hastings said that his company was going to partner with a CE device that had a “material installed base.” The next week, Netflix announced it would make its streaming service available on Sony’s PS3 gaming console, which has an installed base of roughly 9 million units.
A survey from One Touch and the Praxi Group released yesterday estimated that 11.1 percent of Netflix subscribers (roughly 1.2 million people) had watched the Watch Instantly streaming service through a game console, which up until now, meant Microsoft’s (s MSFT) Xbox.
We don’t know how many people in total have requested the special discs, and if any of them are new subscribers brought in by the PS3. Regardless, an initial batch of 100,000 is a good indication that Netflix’s streaming usage will get a nice shot in the arm from the PS3 — and that Netflix is on the right path with the increased emphasis its placing on streaming.

Study: 62% of Netflix Subscribers Have Streamed

Sixty-two percent of Netflix (s NFLX) subscribers have used the company’s streaming service since it launched, new research from One Touch and the Praxi Group indicates. Some 54 percent of 1,000 users surveyed in October say they watch at least one movie or TV show a month (hat tip to VideoNuze for providing the report).
During its most recent earnings call, Netflix said 42 percent of its subs had streamed at least 15 minutes of a title during the third quarter.


Despite the fact that Netflix is embedded on just about any device you can plug into your TV, the study found that more than 60 percent of respondents said they watched on a PC, and 13.4 percent watched via a computer connected to a TV. Game console (read: Xbox) usage was 11.1 percent, DVD player was 5.7 percent, and the Roku was 3.6 percent. As a bonus extrapolation, this last bit of research could indicate that if 3.6 percent of Netflix’s 11.1 million subs watch on a Roku, that would translate to roughly 400,000 Roku boxes in homes.
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New Apple TV Software Is 3.0.K., But Still Needs Some Punch

Apple TVApple (s AAPL) released a software update for its Apple TV set-top box today offering a redesigned interface and support for iTunes LP and iTunes Extras on big screen TVs.

From the press release:

The redesigned main menu on Apple TV gives you instant access to your favorite content. Recently rented or purchased movies, as well as other content including TV shows, music, podcasts, photos and YouTube, are accessible directly from the new main menu.

Along with these nice new visuals, the update also lets users access Internet radio stations through their TVs, and some photo viewing enhancements, including the addition of iPhoto Faces, which uses facial recognition to organize photos. For more on the update, visit our sister site, TheAppleBlog.

An interface refresh is fine and all, but Apple will need to do something much more bold to set itself apart from the highly competitive over-the-top video space. The OTT on-demand rental market will hit $2.1 billion by 2014, and Apple hasn’t been innovating along with its competitors in the TV space. Television manufacturers are baking all kinds of widget functionality directly into the TV, the Roku is expanding its channel partners, and Netflix is getting on every TV-connected device under the sun…except for the Apple TV.

Of course, maybe Apple is bypassing the whole set-top thing entirely by turning its iMacs into TVs.

Game On: Consoles to Rule Web-to-TV Video Delivery

Game consoles are currently the most popular way to pipe web video to TV sets and will remain the dominant delivery platform for this type of video through 2013, according to In-Stat. By then, the research firm predicts, more than 10.7 million game consoles will be used as “web-to-TV mediation devices” in the U.S.

This shouldn’t come as a big surprise. Game consoles had a bit of a head start against the rest of the TV-connected device competition. Microsoft has already moved 30 million Xbox 360s; Sony has sold nearly 23 million units; and Nintendo has topped 50 million Wii sales worldwide. And all three of these devices have varying online video capabilities.

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