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 THE STAT 26Percentage of wireless customers who use their cell phones to take picturesMore Vitals
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APRIL 6, 2005
By Burt Helm IPTV's Revolution May Be on Hold The Internet technology could transform home entertainment. Problem is, what's the point of unlimited channels if studios won't provide content? When Disney's (DIS ) The Incredibles hit theaters last fall, it got a helping hand from SBC (SBC ). The telecommunications giant threw in its own marketing dollars, sponsoring Incredibles giveaways linked with phone service and using the speedy character, Dash, to promote its high-speed Internet service. Now, at the end of this year, SBC will unveil an incredible debut of its own: IPTV, a form of TV that uses Internet technologies. So, Disney would be happy to help out there, right? Maybe not. And that's unfortunate because SBC has a lot riding on its IPTV project. Indeed, the entire telecom industry is hoping IPTV will be the next great frontier for its business. Thanks to new broadband technology, telecom outfits and cable companies can deliver TV, phone, and Internet access over the same high-speed pipes into customers' homes. PLAYING HARD TO GET. The new capabilities could lead to entirely new ways of watching TV. Because IPTV uses huge centralized servers to deliver video into consumers' homes, it can support a nearly unlimited number of channels and allow customers to pick from an à la carte channel selection. It can even offer multiple camera angles for sporting events and make thousands of old movies, TV shows, and events available "on demand" at the push of the button. IPTV differs from earlier forms of Internet-based TV in that, while the video signal is encoded just like data over the Web, it travels solely over SBC's own servers and network. Viewers will find the experience akin to watching digital cable, rather than streaming video on the Web. But improvements like these can happen only if content providers -- media companies and movie studios like Disney -- play along. So far, it seems, they're not. Disney didn't return calls from BusinessWeek Online seeking comment, and it hasn't signed with any outside distributor to provide its movies for video-on-demand. Most studios have agreed to only limited video-on-demand distribution, fearing it could cut into revenues from rentals and DVD sales -- now generating bigger income streams than the box office itself. ANXIOUS STUDIOS. So far, the telcos are moving ahead with their plans and say they'll make final agreements with studios later. SBC, Verizon (VZ ), and BellSouth (BLS ) are planning three of the biggest IPTV deployments in the world. When completed, SBC's service will extend to 18 million homes in 13 states and cost an estimated $4 billion. It also puts the telecom in direct competition with cable companies who are, in turn, venturing onto Baby Bell turf by offering phone service (see BW Online, 5/10/04, "Telecom Turmoil"). But SBC's challenges highlight the difficulties telecommunications and cable players face as they converge on potential dollars in the high-tech TV market. At this early date, no one can tell how many subscribers will sign up for IPTV, but roughly 100 million households now subscribe to some sort of digital TV, either satellite or cable. With the big studios and other content providers uneasy about jumping on board, it may be impossible for the new technology to truly come into its own. SBC is learning that the hard way. Capabilities -- such as à la carte channel selection -- promoted by Chief Executive Ed Whitacre in the fall of 2004 have fallen by the wayside, at least for the initial launch of the new service, according to Lea Ann Champion, senior executive vice-president of IP operations and services at SBC. And it could be some time before video-on-demand reaches its full potential. IDEAL IN THEORY. Not that SBC isn't working overtime to round up content for the fledgling TV service. On Mar. 22, it added five TV executives to its new programming department: Chris Lauricella and Richard Levine from DirecTV (DTV ), Richard Wellerstein from iN Demand Networks, and Amy Friedlander and Martin Sansing from Intertainer, one of the pioneers of video-on-demand technology. They join division head Dan York, a former programming exec from iN Demand Networks, and John Penney from HBO, who were both hired in the fall of 2004. While SBC acknowledges it has completed no programming agreements, York says deals for basic-channel programming are "very far along," and he expects to pay rates comparable to what a small or midsize cable company pays providers for basic channel carriage -- a 15% premium on rates paid by huge cable companies like Comcast (CMCSA ), according to two industry analysts. Working out deals for higher-tech services like video-on-demand is tougher. In theory, this model seems ideal for movie and TV studios: Each could dump its film and TV-show archives onto SBC's massive servers and gain revenue from programs they never before had a way to showcase.
BW MALL
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