Category: The Front Line

Trends: Ignore Them At Your Peril

On August 15, Leichtman Research Group of Durham, NH released its quarterly revenue and subscription numbers for U.S. cable TV providers. And there was a surprise to be found in the calculations.

For the first time ever, the number of broadband service subscribers for major cable TV service providers exceeded (barely) the number of cable TV channel subscribers. This happened during the 2nd quarter of 2014 and represents a milestone for pay TV services. (And yours truly predicted it would happen a year earlier, in a DD posted a few years back. Oh well, close enough for government work…)

The actual differential favoring broadband subscriptions was small, amounting to about 5,000 more broadband customers. The actual totals for cable TV systems (not including Wide Open West, an overbuilder) were 49,915,000 for broadband, and 49,910,000 for cable channel service. What’s more interesting is that thirteen largest pay TV providers in the US (about 95% of the market) lost about 300,000 net video subscribers in 2Q 2014, compared to a loss of about 350,000 video subscribers in 2Q 2013.

To offset that decline, the 17 largest pay TV providers added about 385,000 broadband customers during the same time period. Cable TV companies control the lion’s share of broadband service revenue and have a 59% market share vs. AT&T’s U-Verse and Verizon’s FiOS services. The latter companies stayed essentially flat in new subscribers as an almost equal number of customers dropped DSL service (627,000) compared to those who signed up for faster broadband (636,000).

For all cable and telcos that Leichtman surveyed, the total number of broadband subscribers was about 85 million. Of that total, industry giant Comcast claimed 21.27 million and #2 service provider Time Warner Cable accounted for 11.97 million. Among cable TV companies, those numbers represent 42% and 23% market shares, respectively. (Keep that in mind as you ponder the consequences of a potential Comcast – Time Warner merger.)

Now for some additional perspective: Netflix recently broke the 50 million worldwide subscriber mark, with 36 million of those subscribers located in the United States. That’s larger than any cable TV or telco subscriber base. In fact, it’s more than Comcast and Time Warner combined, and is indicative of the meteoric growth Netflix has experienced since it commenced a streaming service in 2007.

Combined with the shift toward consumption of digital media online vs. renting or buying optical discs (as outlined in my last Display Daily), it’s clear that broadband is becoming the more desirable service for many households. I’d also venture an educated guess that customers who subscribe only to broadband services tend to skew much younger (Millennials) while traditional cable TV channel subscribers skew older (Baby Boomers).

While AT&T and Verizon have a smaller share of the pie, it’s still a large enough slice to motivate Comcast, Time warner et al to keep increasing their broadband speeds and not lose any competitive edge. I am a Comcast subscriber and while writing this article, checked my download speeds using CNET’s Internet Speed Test. The result? 20 Mb/s downstream at 5 PM, which is a considerable boost from what I had three years ago. Could the fact that Verizon ran optical fiber through my front yard a few years ago have anything to do with it?

What does all of this mean, long term? First off, the preference for faster broadband vs. a pile of pay TV channels that most people never watch will continue to re-shape the business model for cable TV companies. (The median number of channels watched in pay TV households currently stands at 17.) Continued price increases and increasing reliance on wireless (and not wired) phone service will prompt more customers to drop so-called “triple play” offerings and just go with broadband (and probably use services like Ooma for VoIP calling).

Secondly, the sheer size of Netflix and its expanding category of both rental movies and original series provide even more impetus for disgruntled pay TV subscribers to dump costly channel packages and stream everything from the Big Red Father. Both House of Cards and Orange Is The New Black are wildly popular – there’s no reason to assume Netflix won’t hit a few more home runs. (And their success is prompting HBO to finally discuss publicly a subscription streaming service independent of cable TV delivery.)

Finally; it may take more time than I prognosticated several years ago, but cable TV companies and telcos will slowly and inevitably morph into something that looks more like your local electric company, providing metered high-speed broadband connections and letting customers decide what they want to watch, and when. The DVR may even pay the ultimate price and fall by the wayside in favor of streaming from cloud servers as this comes to pass.

Even the biggest fires start with a tiny spark, and most people don’t even notice trends until they are well under way. Ignore them at your peril…

Mirasol Finds a Home

I may have been wrong. Here’s some history.

Some years ago Qualcomm purchased an MIT display spinout called Iridigm and renamed the technology mirasol (with a small “m”). At a time before Apple created the consumer tablet revolution, the standard for non-PC media consumption was the eReader, and the standard for low-power reflective displays was (and still is) E Ink’s electrophoretic display technology.

But as good as E Ink was for reading black-and-white text, it had obvious limitations that encouraged several companies to develop competing technologies. The limitations were that, at the time, E Ink was limited to black and white and refresh time was too slow for video or even smooth animation. Iridigm had developed a remarkably elegant reflective technology that promised to overcome E Ink’s limitations, and Qualcomm invested huge amounts of money developing it.

The Iridigm technology used optical interference to create color, with the interference changes created by MEMS-actuated mirrors. As elegant as this approach was, it had practical shortcomings. The technology never developed well-saturated reds, and since color rendering was based on interference, color was very sensitive to viewing angle.

Still, when the competition was E Ink and the application was eReaders, mirasol color might have been good enough, and the

Timex Ironman ONE GPS+ with mirasol SMI reflective color display.  Timex is accepting pre-orders for the watch.  (Photo:  Timex)

Timex Ironman ONE GPS+ with mirasol SMI reflective color display. Timex is accepting pre-orders for the watch. (Photo: Timex)

Korean Kobo bookstore chain did produce a mirasol-based Kobo Reader for the Korean market. Not many units made it to the U.S. but I have one of them, and the color is unsaturated, varies with viewing angle, and has an iridescent quality (suggested in the original Iridigm name) that does not make reading or image viewing easier.

Nonetheless, other mirasol eReader projects were in the works when the consumer tablet revolution struck. Almost overnight, “good-enough” color wasn’t good enough, as the standard for color and motion was now that of the very well developed LCD. The other mirasol eReader projects vanished, and the other developmental color reflective technologies faded away to one degree or another. (LiquaVista, perhaps the most interesting of these, disappeared into the maw of Amazon. I have been assured that the LiquaVista program is alive and well, but beyond that NOBODY is saying ANYTHING.)

Qualcomm retreated into showing wristwatch prototypes, where mirasol’s deficiencies were less obvious and less objectionable, and they also purchased Pixtronix, which had developed a transflective in-plane MEMS technology with field-sequential LED-backlit color. I’ve gone on record as saying Pixtronix was much more likely to be successful than mirasol. (Sharp has combined the Pixtronix technology with its IGZO backplane and will soon be manufacturing these displays in commercial quantities, initially for industrial applications.)

Qualcomm, however, did not give up on mirasol. They developed a new generation of the technology called SMI. The original approach, called IMOD, could only implement one mirror position per subpixel, so a red subpixel was either red or black. SMI permits continuous mirror positioning, so each subpixel (now pixel) can render a full range of colors. In practice, color saturation is improved and the disturbing iridescent quality is reduced. Still, SMI would not be my choice for an eReader or tablet display.

But eReaders are not what Qualcomm is pushing. AT SID 2014, Qualcomm was showing a 5.1-inch smart-phone display with 2560×1440 pixels. (SMI allows much higher pixel density than IMOD with its area dithering, and Qualcomm was showing this off.) Not bad, but it’s hard to see how SMI will match the color quality of AMOLED and quantum-dot-enhanced LCD for smart phones.

More convincing were a 1.45-inch display with 353×352 pixels and a 1.6-inch with 384×384 pixels. Both displays were labeled “wearable” and both had the same 343 ppi pixel density.

Qualcomm was showing its own Toq smart watch, which incorporates the 1.45-inch display (I think), and which is available on Amazon for about $235. Qualcomm is not a manufacturer of consumer products, so we can assume the Toq is designed as a vehicle for mirasol development and exposure. Can this approach convince any “real” watchmakers? The answer is yes.

Timex has just announced its Ironman ONE GPS+ fitness-and-athletics-oriented smart watch, which contains a remarkable collection of hardware, in addition to its mirasol display, for an MSRP of $399.95 ($449.95 with a bundled hear-rate sensor.) Timex is taking pre-orders now.

The phone, which operates independently of a cell phone, includes GPS, text messaging, music storage/playback, interval times, distance and speed calculation, and your friends can use the GPS to track you in real time. The watch is compatible with Bluetooth heart-rate sensors.

The characteristics of mirasol SMI — sunlight readability, very low power consumption, and color (where full color and color fidelity are not required) — are well suited to this application.

Will Timex’s highly functional but expensive athlete’s watch be a winner that stimulates additional wearable uses for mirasol? If Timex has miscalculated, it may deter other potential mirasol customers, even if the display was not at fault. We shall see.

Was I wrong about mirasol? I might have been, but the jury is still coming in.

Ken Werner is Principal of Nutmeg Consultants, specializing in the display industry, manufacturing, technology, and applications, including mobile devices and television. He consults for attorneys, investment analysts, and display-related companies. You can reach him at kwerner@nutmegconsultants.com.

 

4K & UHDTV: Once More Unto The Breach, Dear Friends…

Yesterday, TWICE reported that Samsung, Sony, and LG will partner with Best Buy on a 13-week consumer awareness campaign to increase interest in UHDTV and ultimately drive sales of 4K TVs.

The campaign starts tomorrow and is named “Believing Begins Here.” The Consumer Electronics Association had a part in developing the campaign, which will feature in-store demonstrations of UHDTV at 50 Best Buy locations in 11 major markets, including Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, Minneapolis, New York, Philadelphia and Washington D.C.

The timing of this campaign is no coincidence. National Football League pre-season games have already started, and the first NCAA college football games are scheduled for August 28. And as we all know, nothing sells big-screen TVs like football!

The demonstrations will take place between 11 AM and 3 PM each Saturday for the duration of the campaign. According to the TWICE story, these three major TV brands (and hopefully others to be added later) “…have chosen the last remaining big-box CE specialty chain as their showcase.” (I’m sure HH Gregg and Frye’s would dispute that last statement!)

Does this bring back memories of the stumbling, awkward effort to promote 3D TV five years ago? It should, except there’s a difference this time around. For one thing, there aren’t any eyewear issues, because there’s no eyewear. Assuming BB does a good job with 4K content selection, anyone who happens to wander by the demo can easily and quickly check it out.

For another, there’s aren’t any “exclusive” 3D Blu-ray deals tied to specific manufacturers and TVs, a strategy that amounted to shooting one’s self in the foot back then. Throw in the battle between passive and active 3D, the eye disorders and vision issues almost a quarter of the population experiences, and a paucity of interesting 3D content readily available to viewers, and the obituary for 3D TV was quickly written.

This time around, Best Buy has decided to emphasize 2K/4K upconversion as a “future-proof” advantage of 4K TVs and will have adequate demos of 2K-to-4K program material to make their point. And to attract potential customers, the usual manufacturer promotions and sweepstakes/drawings will be conducted. Prizes include a 55-inch Sony, Samsung, or LG UHDTV with installation and Geek Squad service plan included. (By the way, a 55-inch Samsung 4K TV can be taken out of the box and up and running in about 5 minutes, based on my experiences at InfoComm during my 4K / UHDTV class.)

The television industry clearly has a lot more at stake in 2014 than it did in 2009. TV shipments have declined for two years in a row, and TV prices are collapsing with each quarter. (You can easily buy 60-inch LCD sets for less than $1,000 now, and LG has already dropped a 55-inch 4K “smart” model to less than $2,000.)

For some manufacturers like Panasonic, the TV business has been de-emphasized in favor of commercial electronics products and even beauty aids and appliances. (Panasonic now sources a lot of its LCD TV glass on the wholesale market from Taiwan and China.) For others like Mitsubishi, the business of manufacturing and selling TV is “history” as their profits slowly but inexorably evaporated to nothing.

One fact that Best Buy and its partners can’t really explain to consumers is the changing dynamics of the LCD panel and television components supply chain. Thanks to an aggressive push by Chinese manufacturers into the television business and an emphasis on 4K, we will soon see ALL TVs larger than 55 inches move exclusively to 4K glass, just as we saw the migration from 720p/768p glass to 1080p about 6-7 years ago.

The good news is; 2K-to-4K upscaling is comparatively easy, as my colleague Ken Werner has pointed out in a previous Display Daily. Some manufacturers are even building upscaling chips into HDMI interfaces and cables! So the Best Buy demos should be effective if they start with strong 2K content.

But there are always unanswered questions. Best Buy now sells Vizio TVs, and according to Vizio’s timetable, they will have a full range of heavily discounted UHDTVs available this fall, starting at $999 for a 50-inch TV and going all the way to $2,999 for a 75-inch set. In the key sizes of 55 and 65 inches, the prices will be $1,299 and $2,199, respectively. How does that price war help the Big 3? And why should Vizio have anything to do with this campaign when they can simply sit on the sidelines for a couple of months and then swoop in and capture sales based on their brand recognition?

More devil in the details: We still don’t have a 4K Blu-ray standard, and every month it is delayed lets more wind out of the BD sails. According to a recent Home Media story, consumer spending on streaming, downloads, and optical discs was flat through the first six months of this year, to the tune of $8.6B in the U.S.

The “details” show us that digital spending (downloads and streaming of movies and TV shows) increased by 17% ($3.6B) over the same time period in 2013. Meanwhile, spending on optical discs (DVD and Blu-ray) continues to drop, falling 8% ($3.3B) in the Y-Y comparison. Additionally, rentals of optical discs dropped 14% ($1.7B) compared to the first six months of 2013. Brick and mortar store rentals took an enormous hit of 33%.

Breaking out the Blu-ray category, the story says that Blu-ray disc sales were up by 10% during Q2 ’14, with new theatrical releases up 18% in the same time period. But that’s not enough to offset the overall decline in interest by consumers to buy or rent optical discs. (No numbers were provided for Blu-ray sales revenues.)

Will 4K suffer the same fate as 3D? Not a chance. As I just pointed out, many of our big screen TVs will employ 4K panels exclusively in the not-too-distant future. The infrastructure for 4K streaming is being built and the sales and rental numbers show consumers increasingly prefer that delivery format to accumulating a pile of discs.

I plan to check out the 4K demos myself in “secret shopper” mode and will have a report in a future DD.

The OLED Firmament Does Not Quake — but it’s Vibrating a Little

All of AMOLED-land is divided into two parts.

Part 1:  Samsung dominates production of smart-phone-sized AMOLED displayss, and is now doing the same for tablet-sized AMOLED displays. (The first Samsung Galaxy tablets with AMOLED displays are now available in the U.S. market.)

Part 2:  LG still struggles to make AMOLED TVs a mass-market product, but significant developments in manufacturing processes are needed before costs can come down enough for OLED-TV to be a true high-volume consumer product. LG is committed to achieving this goal, but the road to the mass market continues to be bumpy.

You would think that Samsung’s long-held position as king of the small-OLED hill would have invited some serious competition by now. There is some activity in China and Taiwan, but its modest scale hasn’t been enough to make an appreciable dent in Samsung’s dominance. But now, a significant Chinese player is making a major investment in AMOLED manufacturing.

Tianma's cell-phone-sized AMOLED prototype, as shown at SID 2014 in San Diego.  (Photo:  Ken Werner)

Tianma’s cell-phone-sized AMOLED prototype, as shown at SID 2014 in San Diego. (Photo: Ken Werner)

At SID 2014 in San Diego this past June, Tianma was showing several good-looking AMOLED prototypes, including a 4.3-inch

with 480×800 pixels, on-cell touch, 250 nits, and a claimed contrast ratio of over 10,000 (see photo); and a 5.5-inch with 720×1280 pioxels, 4-lane MIPI interface, 200 nits, and that same claimed contrast ratio of over 10,000.

Tianma’s Stephen Liu told me that Tianma is now building a Gen 5.5 AMOLED fab in China and expects to be ramping up commercial production of smart-phone and tablet sizes in mid-2015.

It’s worth saying that Tianma’s exhibit area was decidedly major league, and fully competitive in design and presentation with those of its first-tier competitors. Tianma combined its China-based Tianma and U.S.-based Tianma-NLT teams to design the booth and select the products and technologies to be presented. Tianma and NLT personnel said they worked hard and long, and were very pleased with the result.

The importance of North-American-style presentation in our market is not always clear to Chinese companies. That Tianma gets it, and was willing to expend significant human and monetary resources to present their competitive technologies in a fully professional manner, is impressive. I will be tracking Tianma more carefully in the future.

Ken Werner is Principal of Nutmeg Consultants, specializing in the display industry, manufacturing, technology, and applications, including mobile devices and television.  He consults for attorneys, investment analysts, and companies entering or repositioning themselves in industries related to displays and the products that use them.  You can reach him at kwerner@nutmegconsultants.com.

Well, Whaddya Know!

It’s late July, and the summer doldrums have definitely arrived. The flow of press releases has slowed to a trickle, and all kinds of strange stuff arrives in my mailbox several times a day – most of it destined for the recycling bin. Even so, there are a few stories worth mentioning.  Let’s take a quick glance.

The tables have turned: Remember when your parents limited the number of hours of TV you could watch in a day? Well, it appears Millennials are self-regulating, when it comes to the boob tube.  According to a story on MediaPost from last Thursday, Nielsen has discovered that the number of hours spent viewing traditional TV continues to decline year-over-year for this demographic.

Nielsen’s current numbers show that the average Millennial watched a little less than 22 hours of traditional TV, per week, during the first quarter of this year. That’s a decline of 14 minutes per day from Q1 2013. In contrast, their parents (50 – 64 and 65+) watched more than twice that amount at 45 and 52 hours, respectively. (Well, us Baby Boomers grew up with television, so maybe that’s not surprising.)

Much ado about nothing? Aereo, the renegade broadcast TV-over-IP “antenna” service that lost a major ruling in the U. S. Supreme Court last month, flip-flopped in its assertion that it wasn’t a cable TV system and insisted it was, applying for a license to broadcast copyrighted content from the U.S. Copyright Office. But Aereo’s request was just turned down by that august body, putting its future into limbo.

Now, a story on the GigaOM Web site suggests that Aereo had maybe 100,000 subscribers at most. How do we know that? Well, as part of its application to the U.S. Copyright Office, Aereo submitted a payment of $5,310.74 to cover “royalty and filing fees” from January 2012 through the end of last year. Using some basic assumptions about Aereo (such as its monthly subscriber fee) and royalty payments of .33 to 1.064% of gross profits, law professor Bruce Boyden backed into a guess of around $1 million gross revenue for that time period.

That’s not a great ROI for the time and investments Aereo made, and the article stated that, even if all of the $1M in revenue came in 2013, it represents only 10,000 subscribers.  We’ll have to see what the next steps are, pending more hearings in court next month.

Not selling like hotcakes, Part I: Apple’s recent financial results show that the company sold 35.2 million iPhones in Q2 2014. That’s up over 12% Y-Y and was largely driven by a big jump in sales in Brazil, Russia, India, and China, a.k.a the BRIC countries. Good news, but offset by the fact that iPad sales dropped 9.2% in the same quarter. That follows a 16% decline in iPad sales in Q1 2014. What’s going on here?

One obvious answer is that consumers don’t turn over their tablets quite as often as their phones. I’ve seen other research that shows a retention rate of 2+ years for tablets, which implies satisfaction with these products. But that doesn’t help Apple’s bottom line, which is why they’re pushing into the “wearables” market – and just got a patent for a new smartwatch called iTime that features sensors, in-strap circuitry, and support for arm and wrist gestures, according to the ETCentric Web site. Will it offset declining iPad sales?

Not selling like hotcakes, Part II: Finally, from the Home Media Web site, we get a story that says “UHDTVs are underwhelming at the marketplace,” based on market research by HIS. The share of UHDTV shipments among the top 13 LCD brands reached 5% in May, up from 4% in April, 3% in March, and 2% in February. (Hmmm…so, they’ve increased by more than 100% in three months? That’s not too shoddy!)

IHS goes on to state that “UHDTV pricing remains too high to gain meaningful market share.” Well, duh! Until recently, all Japanese and Korean UHDTV sets in the 55-inch class were priced close to $3,000, and we know that’s a non-starter. But LG recently cut its 55-inch 4K LED TV to $1,999, and Vizio will be launching a 55-inch 4K LED for just $1,300 in the fourth quarter.

HIS analyst Jusy Hong was quoted in the story as saying that UHDTV shipments will increase to 14.5 million by the end of the year, up from a paltry 2 million in 2013 – and that’s nothing to sneeze at.  Samsung and LG are the kingmakers here, accounting for 46% of all UHDTV shipments in May. In contrast, the “big six” Chinese brands – Haier, Hisense, Skyworth, TCL, Konka, and Changhong – captured a combined total of 45% market share in UHDTVs.

Gotta run! The reclining chair and an ice-cold glass of lemonade are calling…