Gamespot has more noise on the expanding role the Playstation Portable may have in the future. According to the article, when the PSP is released in South Korea in May, it will include a new piece of bundled software called the Network Utility UMD. With that running, users of the PSP will be able to:

Other networked services scheduled for PSP consumers in Korea include on-demand streaming music, on-demand streaming videos (including TV shows), e-learning options, and electronic books. SCEK and KT expect that they will be the first companies to provide a full online experience for the PSP user in any market.

It’s unclear from the article whether this service just streams content wirelessly for real-time viewing or if you’ll be able to save the result on a Memory Stick Duo card for later viewing. Assuming that you can save the results to the Duo card, this could be a great way to grab a few videos before hopping on a plane.

From my point of view, this seems like a better approach for video distribution than buying UMD discs of movies. I can’t really see the financial justification of buying a PSP UMD movie for the same price as a DVD, but only be able to watch it on a small PSP screen. On the other hand, having the ability to download a video for a reasonable fee of $5 to watch while travelling makes a great deal of sense.

Since VOD service provider MovieLink already has licensed content from Sony Pictures, it’s not a stretch to think that a service like Movielink would extend their service into the PSP. It’s even less of a stretch to think that since Sony is already dipping its corporate toe into downloadable movies, it might try the same approach for the PSP.

Along with many others, I waited in line patiently Thursday to purchase the new Playstation Portable (PSP), and thankfully with the many units on the shelf at the local Bestbuy, I didn’t have to wait too long. Like others in line, I was eager to try out some of the new game titles, but I also was very eager to try out the Videora founder, Sajeeth Cherian’s latest software project, PSP Video 9, a freeware software product that makes it easy to move video on to the PSP. While the PSP is cool product for gaming, PSP Video 9 also makes the PSP a good product for viewing videos.

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Thomas Hawk has an excellent post discussing what the value of Tivo could mean to Comcast’s bottom line. It all comes down to retaining customers or reducing “churn”, as the post puts it:

According to Macke the churn rate for DirecTV/TiVo users is .2% per month. “That’s one full percentage point lower than the levels of churn for Comcast DVR
customers (to take one example and please note that this rate isn’t stated
openly by Comcast or any other cable cos… but it can be worked out from the
information they do give).”

Macke does some back of the envelope math and concludes that by reducing churn 1% that Comcast would save about $60 million per month – that’s a lot of dough.

I think there were probably many reasons why this deal made sense for Comcast, but if it is accurate that customer acquistion costs are $800 for Comcast, keeping those customers without dropping rates is a key concern. It’s no wonder that Comcast gives away free its OnDemand VOD service, something that gives cable operators an advantage over satellite. As long as you keep writing those digital cable checks each month and don’t switch services, Comcast is happy. If it takes Tivo-lite to reduce that chance of switching, it’s a small overall price to pay.

If you don’t like TivoToGo and its DRM technology (copyright protection), you’re really not going to like the next version of the Windows OS codenamed Longhorn, at least according to eHomeupgrade’s article, “The Broadcast Flag is Nothing Compared to What Microsoft Has in the Works for DRM”.

Thank goodness DRM technology wasn’t available when they invented toilet paper, or we’d have to type in a password before use for fear that we might use it to scribble copyrighted Walt Whitman poems.

(Hat Tip: Digital Media Thoughts Newsletter)

Thursday Sony will launch their much anticipated Playstation Portable (PSP) which many have said is the next generation of portable gaming. It also includes support for MPEG4 video encoded movies, as well as audio MP3 files. From the reviews I’ve read, it’s been given high marks for gaming and been knocked for it’s support for video. From the Washington Post review:

As a portable game machine, it’s a peerless piece of work, combining sharp graphics, deep game play and easy online connectivity. As a multimedia gadget, however, it’s a dud.

The review goes on to point out the lack of support Sony gave to make video and audio easy. For instance, it doesn’t come bundled with a USB cable as well as a puny memory stick, incapable of storing video and audio files. It also lacks any PC software to make it easy to transfer video and audio to the PSP.

Sajeeth Cherian, the creative talent behind Videora, is trying to make it easier to use the PSP as a media device. His new freeware software, PSP Video 9, looks like something Sony should have bundled with the PSP. PSP Video 9 will automatically transcode a video file into the proper format for the PSP and transfer it. It also has integration with his BitTorrent software, Videora, so that you can download and transcode all automatically.

I’ve been wondering what my rationale would be to stand in line Thursday to get a PSP.

Mark this under the column “bad news”, Build Your Own PVR.com is reporting that the deadline for cable and satellite operators to include support for CableCard has been extended an additional year (from 2006 to 2007). This is bad news.

Implementation of CableCARD technologies will definitely help create innovation by removing one of the big hurdles for DVR technologies, the set top box, and allow software and hardware companies to create new products without partnering with cable and satellite operators. No doubt that some companies stand to lose power if CableCARD is forced upon them, but in my mind, better to let us, the consumers have the power to choose.

Alex, from Democracy In Media, has an interesting post on the Tivo/Comcast deal which I think is very insightful. First, here is theory on what went down at Tivo:

“TiVo has had an internal power struggle between two camps for some time. One camp, led by Ramsay, felt that TiVo needed to focus on generating substantial (i.e. profitable) monthly fees on TiVo services, while (most importantly) retaining control over technology direction (i.e. ability to innovate). The second camp has been all about driving consumer growth through carrier channels (as it turns out, at almost any cost.) It appears that this internal struggle has run its course and the latter group has prevailed. I believe that this is a bad thing for TiVo’s customers, and therefore a bad thing for TiVo in the final analysis.”

Given the news we’ve seen lately about Ramsay nixing a previous Comcast deal, his decision to step down as CEO, and now the Comcast partnership being resurrected, this two camp scenario seems likely.

Alex goes on to describe how Tivo is pulled into two directions:

Here’s the problem, TiVo is going to start to resemble a two-headed monster (and not in the positive sense of that term)…

1. Head 1: Right now, TiVo gets substantial subscriber growth from the sale of DirecTiVo devices. These sales ultimately add very little to the bottom line. In fact, I would say that at $1/month, TiVo has been right to downplay the value of this revenue and this relationship. As with DirecTV, it appears that the Comcast deal should add substantial additional subscriber growth, although also at a price point less than $1. (I would anticipate that the final number represented the amount at which TiVo felt that they actually broke even on the deal. They have a good idea what that number is now having dealt at length with DirecTV.) Now, since they don’t make any money on the hardware (certainly in this case since they’ll be integrating with Moto boxes) and they won’t make any money on the service, this head is all about maximizing the leverage that a large customer base will afford with advertisers. For this head, advertisers are king, not customers.
2. Head 2: While TiVo does not generate substantial growth from the sale of devices directly to consumers, these sales are their bread and butter. These sales are where TiVo generates all of its margin-rich revenue. While the cost of marketing has escalated, TiVo can actually make money on their current subscription fees if they decided to ramp down marketing expenditures considerably. As I believe Ramsay said in an IR call recently, “FY 2006 is all about $12.95 per month” (Well, not quite Mike…) Anyway, the point is that for this head, the goal is all about maximizing the value of the product for consumers to ensure people keep buying boxes, paying a monthly fee for service, and generally talking positively about the TiVo service. For this head, customers are king, not advertisers.

I think this has been going on for a long time in the pursuit to find a profitable strategy. Plans to put advertising on screen during fast-forwarding, as well as the big limitations put on extracting video from a Tivo, have more to do with building up partnerships then to provide additional value to customers.

Here’s why he thinks it’s bad for customers:

As time progresses, TiVo will be forced to focus more and more attention on pleasing folks like Comcast until eventually, their priorities change completely. As a result, I believe that the new priority list for TiVo is going to evolve into something more like this:

1. What’s important to Carriers,
2. What’s important to Advertisers,
3. What’s Important to Consumers.

As a consumer, I don’t like this priority list. But either way, they need to resolve this issue or risk disappointing all their constituents (as TiVoToGo clearly demonstrated.)

I think he’s right, but from my point of view, Tivo’s options were limited by the market dynamics for DVR. Without working with carriers, Tivo has an uphill battle trying to sell DVRs into retail. Without a significant investment in marketing to generate sales, in all likelihood retailers would start dropping the product, further eroding sales. The four P’s of Marketing, Product, Price, Placement (Distribution), and Promotion don’t work so hot if you have no solution for 3 out of the 4 P’s.

My hope for Tivo is to try and retain its innovation until there is a viable CableCARD solution, which if the technology is implemented removes the roadblock of the set top box. This is particularly important for HDTV transmissions where there is no inexpensive solution to encode HDTV analog signals. Until then, the Carriers have a significant advantage on the market, and we the consumers will continue to be the third priority.

Via Thomashawk.com, Tivo has announced a deal with Comcast providing a customized version of their product for Comcast subscribers starting in mid-2006. As has been pointed out, Tivo has been struggling in retail to grow its customer base, and this deal should help grow it’s subscriber numbers substantially in its quest to become profitable. Comcast is the biggest cable company in the US, so if the terms are favorable, this will mean a lot to the future of the company.

The undisclosed details of the deal make all the difference in how this deal will impact Tivo long term and Tivo certainly wasn’t in the best negotiating position, but any deal is good news to the company in the short term. With all the negative attention focused on Tivo in the last few months, this deal will certainly help convince wary DVR purchasers that Tivo is here to stay, and that can only help sales moving forward. What a difference a day makes!

Megazone, from TivoLovers weblog, has a good rebuttal to all the commentary on the impending doom of Tivo. PVRBlog discusses his post and there is also a good dialog going on in the commments.

Megazone makes many valid points about Tivo. It would be a mistake to strictly look at last quarter with Tivo’s $33M loss and $120M or so in the bank, and assume there will be a huge crator in Alviso 9 months or so from now. They undoubtedly will cut back their costs to help with their cash flow and a successful launch of a Cablecard product would help address their lack of HDTV offerings. They have time to change course.

I would quibble with the idea that Tivo is running an “operating profit” at this point and could be profitable if they wanted. Their service revenue is growing and runs on nice margins, but it can’t be sustainable without selling more hardware, and the costs associated with the hardware business remains expensive. According to my back of the envelope calculations, every $1 that Tivo receives from the sale of hardware costs them $1.54. That’s up from $1.21 a year ago. It will be interesting to see how that ratio will be effected with a standalone cablecard product. If the cost to add cablecard is low and Tivo can demand a premium for a standalone HDTV product, the hardware cost ratios will surely change to Tivo’s benefit.

Megazone makes the point that most people don’t own an HDTV yet. That’s true, but I’d hazard a guess that HDTV owners are more likely to be DVR owners, and up until Tivo has a HDTV offering, there will be a certain abandon rate of existing Tivo owners who purchase an HDTV, as well as an impact on future Tivo sales from people looking for a DVR who already own a HDTV. The lack of a HDTV offering doesn’t mean the imminent death of Tivo, but it certainly has a negative effect on its business.

The biggest positive impact for Tivo will be if their patents hold up in court. If they do have some court victories on broad technology patents and make it difficult for new and existing competitors, the calculus for Tivo changes dramatically. If they are easily circumvented, court victories will be short lived.

Without patent protection, Tivo’s competitors will continue to improve upon their products, and NDS, Motorola, Scientific Atlanta, and Microsoft are all big enough that they can continue to spend research and development dollars to continue to innovate. The first to market advantage Tivo had in the beginning has been all but eroded at this point; the question really is whether Tivo can continue to stay ahead on the innovation curve.

At the end of the day, Tivo has some big problems facing it on the way to profitability and growth. Megazone reminds us that Tivo is still paying its electricity bills and will be for some time. Tivo has the time and resources to make changes to be a successful company; the hard part is figuring out what changes to make.

The Tivo earnings conference call generated a lot of buzz around the web based on some statements CEO Mike Ramsey said during the call. Here are Thomas Hawk’s notes on the subject:

Deliver a TiVo branded experience on the PC. Wow. This is huge. Although there are over 3 million TiVo units out there right now (about a million with broadband connection) there are vastly, vastly more PCs out there. “This platform (PC) is playing an increasing role in the management of home entertainment and TiVo intends to offer applications and services that capitalize on the PCs unique power and network capabilities as well as it’s enormous reach and scale of install base,” said Ramsay.

I have suggested in the past that TiVo needs to offer a software solution to run on the PC. They did not elaborate on what form this “TiVo branded PC experience” might take. Could this be a possible competitor to Microsoft’s Media Center PC? Might TiVo begin to sell a stand-alone software package that could be installed on a PC with a TV tuner card?

Quite a few others have commented on this particular subject including Build Your Own PVR, PVRBlog, Ars Technica, SlashDot, and Om Malik, all with some interesting observations. I agree with Rampy of BYOPVR.com when he says he’s “not holding his breath”. Like Rampy, I’m going to keep the oxygen flowing in the near term.

There is no doubt that Tivo could do more on the PC platform to add value to its experience. PCs and large hard drives are cheap, as are network attached storage devices (e.g. file servers) like NasLite. Being able to save Tivo recorded programs to a server with TivoToGo is nice, but being able to move it back on to the Tivo for later viewing would be much nicer. If you couple that with the ability to access other media from a Tivo available on a PC network such as downloadable movie services, iTunes, and other content, that would be nice as well.

The head scratcher for me is the term “Tivo Branded Experience on a PC” which implies moving functionality over from the Tivo on to the PC. I hearken you back to a post I did last year called “Tivo and the Mustard Lesson”:

For an example of the “revolving-world vision”, a successful company that sells mustard might very well come to the conclusion that mustard is the reason people eat hotdogs, and maybe if their product is really great, there may be an element of truth to it. If the world revolves around mustard, the corporate theory goes, and people eat other foods in greater quantity, then the company can grow its revenues by expanding into other food groups. Unfortunately, it’s only one delusional step away before they start selling mustard as an ice cream topping and wonder why people aren’t buying it. The mustard lesson: don’t try to be a new food group if you are really a condiment.

If I’m going through the trouble to rig up a PC as a DVR, is the Tivo interface really worth the $11.95 a month subscriber fee when I can use MCE 2005, BeyondTV, SageTV, MythTV, GBPVR, Meedio, or MediaPortal that all have no monthly service fee? Do I really prefer the hassles of TivoToGo’s DRM (copy protection) over the standard MPEG2 files other products produce? Even if you could come up with a solution that has traction, does Tivo really want to compete directly with behemoth Microsoft that could easily give the technology away or incorporate it directly into a future version of the OS?

Tivo is great; don’t get me wrong. The value, however, is in the entire hardware and software solution and the television experience you have using it from the comfort of your living room couch. It’s easy to setup, use, and it’s very reliable. That integration is very hard to do if you don’t control the hardware specs, OS, and other software competing for resources.

When you look at Tivo in the retail DVR market, one has trouble finding a way for them to compete with lower cost, better integrated (at least integrated with a set top box) solutions coming from cable and satellite operators. I’m not sure if you take the Tivo software out of the box, you won’t find the same thing in the software market: lower cost, better integrated products.