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>> Hello everybody, and welcome to The Next Big Thing. It's great to have you here.
>> Thank you. I know a lot of you are frequent flyers, repeat customers. Thank you for being here again. This is our sixth year of doing this session every year brought to you by the editors of Cnet.com in partnership with the Consumer Electronics Association. And what we do here every year in case you're new to this event is we try to isolate one big topic that's going to really inform CE trends in the year ahead or in typically several years ahead. These are not ideas that are way out in the future. We're not going to show you something that is going to require some enormous amount of technological innovation to take root. That's a different discussion. This is about something that's happening right now and is going to change the way you and your customers and your partners do business, reach consumers, create content, and distribute that. And we've identified a major C-change this year in how television, video, movies, all manner of film and video content reach consumes and allow them to choose feedback, share, recommend, and experience that content. It's a completely different world of TV hence our topic this year, I Want My IPTV. And, of course, that's an idea that's been kicked around for a while. Finally we're glad to announce here this year it's taken root. Took it a decade or so, but I think we're finally there. This is an event where we don't just give you a viewpoint. As you know if you've been here before this is a very interactive event, and to help me get that across and to help me explore this technology and this topic, I like to bring on my colleague editors, executive editors at Cnet.com. Please welcome Molly Wood and Tom Merritt.
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>> And we'll, of course, be bringing a panel on, which they have the unfortunate happenstance to be the objects of a lot of grilling coming up in the next hour. And that's what we're here to do is to really bring you five of what we really believe is the best minds we've ever had on The Next Big Thing session. We've had some great panels up here, but as we planned this amongst ourselves we kept sitting back saying, "This is an amazing panel of minds. So focused and yet from so many diverse aspects of this whole concept of internet delivered TV and video." So please if you will, let's have our panelists come and take their seats. I'll introduce them as they come on up. Let's have a big hand for our panelists. Bring them all up one at a time.
>> We have Terry Denson, VP of Content Strategy and Acquisition for Verizon. Terry, come on up. Hello, Terry. Thank you for being with us. Take your seat. We've got Avner Ronen, the CEO of BOXEE, a very big boast topic here at the show. Avner, welcome. Dan Schinasi is Senior HDTV Product Planner at Samsung. They make a couple of TVs and such, don't they? Yeah. Or more than a few. And we've got Sam Schwartz, President of Comcast Interactive Capital. Sam, welcome. Big hand for Sam. And a well-known name to us in the CBS world, Quincy Smith whose is not partner at Code Advisors. And, of course, many of you know him from CBS Interactive. So a big hand for Quincy as well.
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>> Now the final piece of the point of view we're going to bring to you is not just CNET editorial voice and these five really sharp, well-positioned minds. But it's also your position as well, your viewpoint as we go through this. And as a result many of you have found on your seats, about half of you have a voting deice. Ya'll have one of those in the front half of the room. And if not, pick that up. If you threw it down thinking someone left their cell phone behind, you were going to take it to the lost and found; not the case. This is a wireless instant voting device that many of you may have seen before, and we're going to be taking your temperature several times throughout this, because in this room we have everybody from OEM to retail to channel to analysis to content creation; a whole lot of different viewpoints in here. And so we're going to be taking votes with you six times throughout this presentation at key junctures to see how you feel as the conversation moves. And you might find that it reveals a change in how you as a group feel which is going to be a nice, little sort of micracosm or microcosm of how the users are going to go through a similar evolution as they discover this whole concept as well. But it may take them a little longer, because they don't have the benefit of this kind of intensive session. Let's practice with these voting terminals right now. We've got a quick practice question. And the way it works is you press the button you want for the answers that you want to select. So here's our question. This remote voting device is cooler than an iPhone. Press 1 for yes, 2 for no. Once we say that, we give you ten seconds to vote as you'll see here on the screen. And during that ten seconds by the way [background sound effects], there's the counter. You can press 1 or 2 repeatedly. Your last vote is the one that counts, so you can change your mind up until the timer runs out. And all you've got to do is press a number, no other button, no send or anything like that. And it takes us just a few seconds as you'll see here. And we'll get the vote results right here in a lovely PowerPoint pie chart. That's why I love this room so much.
>> Twenty-nine percent haters.
>> Because you're telling these jobs where to go. I didn't mean that. Okay, so we're all set. The concept IPTV. You know, there are a lot of names for this. It's been getting the monocure of OTT or over the top a lot lately, because delivery content over the top of existing internet infrastructure and home broadband connections. But not just any content. It's about something that really goes after the infrastructure of television, cable, satellite, and a lot of other industries. So let's take a look at an overview video of what it is we're exactly talking about.
>> Watching TV on the internet. Yeah, I know what you're thinking. Some little glitchy window of possibly pirated video on your computer screen, or maybe you hook the whole thing up to your HD TV and blow it all up to the worst possible resolution. The Next Big Thing is nothing like that. It's about offering TV, movies, and video over the top of existing broadband internet connections in full screen, high or even high-def quality, and without a PC or web browser in sight. For the consumer it promises less friction, possibly much lower cost, and most of all a lot more choice.
>> I want to be able to watch wherever I want whenever I want.
>> Where the market is going whether it's legislated that way or not is really ala carte.
>> For content creators it promises to clear a path to viewers that has been gate catch for far too long.
>> It's a real opportunity for the first guy who gets it right. And when they do, I think all the others will kind of come crashing down.
>> For distributors and broadcasters, it spells a completely future with opportunities and ample uncertainty over a dramatically changing business model.
>> The distribution models, we've got to look at it as broken.
>> And for CE makers and venders, OTT, over the top, has already spawned a hot new class of products and services in home and in hand. There's no new technology or some hot new startup powering all this. That's why it's so compelling. It arises from the presence of the internet, home broadband, and an ongoing appetite for choice. It's a very simple look at what we're talking about here. It's about giving consumers choice, voice, and control that they haven't had before over their content. So let's do a quick vote, take your temperature on this particular topic as we get the initial look at it. In this case the question is will internet delivered TV and video--and by the way, that was a test slide. That is not your vote. Don't feel like we've pre-revealed it by reading your minds. That would be weird. Will internet delivered TV and video as we've just talked about very briefly dominate or merely augment traditional methods of viewing? Press 1 if you think it's going to completely change the landscape. Press 2 if you think it's going to take its place alongside traditional cable, satellite, broadcast, and other means. Let's take about ten seconds to get your vote on that.
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>> Okay. Ten seconds are up. Let's see what you said. Computer is working. Oh, next question. Hang on. We'll do two questions here. What piece of internet enabled video gear will succeed best and soonest in this revolution? Will it be the TV? Will it be the Blu-ray player? Will it be a game console, or a set-top box? All of these are available connected. They can do this over the top delivery, reception, and choice. The question is which one do you think is going to print with consumers first. Give us your vote. One for TV, 2 for Blu-ray player, 3 for a game console, or 4 for a set-top box. We'll give you few seconds on that.
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>> All of these are on the market as you know. Okay, now let's get a look at the results from this room. Then we're going to reveal our CNET web results in just a moment. So here's the results we've got from the first or the second question we just did. Looks a very even, very even look here at about slightly for the set-top box like a Netflix box or the BOXEE box that we're going to be hearing quite a bit about. And then pretty even across the television and the game console. Notice that the Blu-ray player got the slimmest slice of the results there. Let's take a look at the results on the other question which is dominate or augment that. How big a trend is this going to be? Interesting. About 64 percent of you say it's going to augment as opposed to be the next really big C-change. I think we'll change your mind in the next few minutes. Let's see. Okay, we did also put this out to the CNET web audience as we mentioned. Let's take a look at what they said about the same questions. And, again, this has been out for several weeks in front of CNET's 18 million unique users monthly. And in this case we have a little different spread. We've got 48 percent of them saying it's going to completely change the landscape and 52 percent augment. So lined up with this room but not in the same scale or weight. And in terms of what device is going to be the one that really is the carrier, if you will, to bring this into peoples' households; the CNET web audience was pretty soundly on the game console followed by the television and then similar numbers for Blu-ray player and set-top box. So there we go with an initial look at how we're going to start with this room and see how the CNET audience is going. Let's get into our panel now and start to discus very briefly just these results before we dive into the next aspect of this. Avner, I want to start with you. Off the top of your head, are you surprised by any of this that we've seen from the room?
>> Yes. And I think that in the short-term, obviously game consoles today, they dominate the connected living room. Long-term, I think Blu-ray player, I think, gets an unfair discount. I think that price of it is going down. I think the fact that the performance supports 3D would mean that people are going to buy it. And I think they're going to come with a lot of connected. Those Blu-ray players will be connected, and I think that's going to be cheap and affordable and people opting to replace their DVDs. And I think Blu-rays going to do very well, and I think set up boxes will also do well. I more agree with the smart audience in the room than the crowds, the 18 million.
>> Any other strong gut reactions, Tom, Molly, or any surprises in what we saw here at this initial temperature take?
>> I was a little surprised that the game console didn't do better in the room, because a lot of people consider that to be the ultimate set-top box. If you're going to go to set-top box, some people say, well, the game console because the prices are cheap enough that I can get more for my money. I can get the video over the internet and the games and the DVD player, the Blu-ray player with that. I wasn't so surprised to see the audience say that, but that may be more of a consumer mindset versus an industry mindset there.
>> Yeah, and I think, you know, given margins of error in online polls, I was surprised that the results between dominating and augmenting were so close with the web audience that they really at this point don't seem totally sure; consumers, which way they're going to break.
>> Any other strong opinions in the panel? Anything?
>> A little bit surprising about the Blu-ray player. The industry is foreseeing about five million connected Blu-rays in 2010.
>> You guys were out there very early on those. You had them as soon as they were out.
>> We were out there early. Those will be well. I expect them to climb if you repolled in the future.
>> Alright, we'll let's stop now and take a look at the next aspect in our video exploration of this before we dive into the deep dive with our panel. And that is what is the promise? What is the specific benefits that consumers can get? In other words, what do we believe is going to entice a large number of consumers to go this way for their television and movie content versus a traditional method? Let's take a look at a few thoughts about that.
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>> It's a really simple setup. I've got a Panasonic LCD projector, back mini, connected to high-definition antenna when and if I need it for football, live news, stuff like that. Got a Play Station Three for gaming and Blu-ray. I control it all with a little Bluetooth mouse keyboard. It's a great system. A total cost was less than a 50 inch plasma, and it's all free.
>> Joel Yarmon pays virtually nothing to watch TV. He got rid of 100 dollar cable bill and traded it in for free television online. And so far it's working out great, and Joel is not alone.
>> There's plenty of anecdotal evidence that shows middle America, mainstream America is figuring out they can get movies and TV shows when they want them for free. The genie is out of the bottle, and they're going to have to figure this out.
>> But this genie is more than just anecdotal. A new trend is brewing, and its name is Over the Top. That term refers to people who are bypassing traditional paid TV like cable and satellite and are getting all, most, or even a little bit of their TV from the internet. The diffusion group estimates that about two-thirds of adult broadband consumers are interested in going over the top in some way. Either they'll replace their cable completely. They may add to their current service with internet video, or they're ready to cut the chord as soon as the technology is ready. And I'm here to tell you that technology is close. You can stream Netflix movies and TV over your TiVo, your X-box 360, or even just your laptop. And the latest prop of internet connected TVs might even mean you can stream those movies and television shows without a TiVo or X-box or laptop. It'll all be built right in. Now if you don't want to buy a new TV, you can get all those Netflix movies plus Amazon video on demand and internet video and radio all packaged up in a 99 dollar Roku box that plugs into your TV. Apple TV lets you buy TV shows and movies and lets you stream them to your television. And there have even been rumors that Apple itself might offer a 30 dollar television subscription plan that doesn't involve cable at all. And if you just want to use a computer like Joel, there's always software like BOXEE. And there are websites like Hulu, JustinTV, and Cyreal dot com. And we haven't even talked about the mbile possibilities. Buy a show from iTunes, and take it on your iPod to watch wherever you want. Better yet, get full streaming episodes on your phone with everything from the TV.com iPhone app to flow TV. Today's consumer is starting to figure out that they can have the TV they want when they want it and where they want it. And they can do it for little more than the cost of the internet connection and sometimes without even watching and commercials. This is a trend that could change the face of TV watching, and it's a scary reality for some. But it's a reality they can not ignore.
>> If you're a studio chief, where is my audience? Well, they're going to the internet. If it's not as profitable, so what. That's where your audience is going, and you've got to be where the audience is.
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>> Okay, good times. Right? The land of milk and honey, nothing to it. Let's take your pulse though and see if it's really going to be that simple. Let's take another two question vote here, so get your voting panels back out. Oh, one question here. Okay. The voice in my ear is telling me that. I'm not crazy. How likely are you to get rid of cable for internet TV? Very is choice 1. Somewhat is choice two 2 or not at all choice 3. Talking about you here in the room. We'll compare that to our CNET web results as well.
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>> Okay, let's see your results. Boy, pretty even. Somewhat very, almost the same, and a few less of you are thinking not at all. So that's not going to be very indicative of us. Let's take a look at what the CNET web audience said. Not helping us. How likely are you to get rid of cable for internet TV? Put to the web audience, to the CNET web audience. Little on the early adoption side, but by no means just a bunch of geeks. Very 45 percent. Much more clear mandate there, and then somewhat not at all. Relatively even on that. Now let's dive into this and go to our panel and see where they're going to take this idea of this vast promise. Who's got the first thought about how powerful this can be? Sam Schwartz? Sam?
>> I think, you know, a lot of what's going on is that people are getting a lot of great options. Consumer content on a lot of the different platforms. And I work for Comcast obviously. And from our perspective, our job is to continue to follow consumer as they want to continue to consume content on all platforms of their control at any time. For us, you know, for a fixed price today they get millions of choices every month from us about anything they can watch. There are a lot of people in this country who would have difficult in today setting this kind of stuff up. We just launched a product recently where we brought content that hadn't been on the web before. For example, if you're a Comcast subscriber, you get to watch that stuff at no extra charge on the web, about 2,000 hours of premium content like HBO and other channels. And I think the challenge for companies like us is to continue to innovate and to add more value to the subscription that people are already paying. You know, I think a lot of this is a story about content itself. Today, it's--you know, this little video you showed probably mentioned the word free about four or five times. Content isn't created for free. You know, Quincy, you can jump in whenever you want.
>> You're doing fine.
>> I'm doing fine. There's--between--advertising is about a 60 billion dollar television industry the United States, and subscription is about another 60 billion plus or minus. I may not have the numbers exactly right. It's about 120 billion dollars that goes to create all this great content that people enjoy. You know, in some of these new models free doesn't equal 120 billion dollars. And we have to continue to think about the business models in this industry and the whole value chain of how all the way back to how this stuff is created and what this means for the future of content creation.
>> When we're talking about the promise of this, I think a lot of people out there are confused. They want to go here. The want to get the TV. We get this question a lot at CNET. How do I go about this? What's the best way? You guys are on the other end. You're making it for them. Do you have some guidance for them without just saying, "Use my product," necessarily? Like what do they need to know? What's the learning barrier? How can we make it easier for them I guess is what I'm really asking here.
>> Don't look at Cooley. He's doesn't have the answer.
>> He's not going to help you. I mean, I think Dan or Avner, I think you guys are really laying the groundwork for this. Certainly Dan, you know, attempts on you guys are building internet connected TVs. You're putting all kinds of widget and beyond widget capability and beyond. I mean, you must see this as more than just being able to get weather on your television.
>> Sure. We do. At Samsung it's not just over the top. It's also interactivity with content. We have a click by remote to shop. We have another application where you can play games on your TV and interact with your cell phone, your smart phone. So we don't see it as just putting out of business cable TV companies or satellite companies. We see it as bring complimentary and guidance to folks that are developing applications. It's a little different than the web. It's very similar. The language is very similar. But it's a ten-foot experience. A lot of people think of IPTV. It's a laid back. It's a ten-foot experience. So you're on the couch. You don't want to engage so much, so it's a little bit different mindset when you develop applications.
>> Well, and certainly Terry, you must have some on the potential, you know, much beyond the ten-foot experience
>> Well, sure. What we like to do at Verizon is we want to--we want to have deployed innovation that is well beyond current customer aspiration. And what I mean by that is that we want to be able to deliver on some of the promises that we're talking here. So we understand for instance that there may be a meaningful market for internet TV. When that internet TV market is ready, we're there. And by way of example, we have in our standard--in our standard install for files, a customer actually will have access to internet TV via our medium manager client. And we have that. We also augment and innovate with respect to our IP delivered services by way of widgets. So we have a number of value added services like our--we have an NFL Red Zone widget, for instance, in which customers can sign up for--they sign up for alerts with this widget. And what this widget does is it tells a customer who has the Red Zone when their team is within the 20 yard line, and then they can access that content directly. So there's a number of valued added services that are--that meet with the promise of customer aspiration today and then with delivering on this innovation of tomorrow having this all in internet television. Well, if that happens, that's great for us. And it doesn't matter whether it happens for consumption on the display in the living room, your 60 inch display, or whether it happens on the broadband display. Because we come with the files to fight. We've got to the fiber to the home. We've got unparalleled speeds. So I think in that regard, however it is that people feel, we can satisfy whatever way the people believe the future will go.
>> I have another perspective on why people feel this way. I think content--I don't think people expected that content will be free. If there are, I think, it's a small minority. I think that appeal of internet TV is the fact that it's the internet. It's open. It's not controlled. The innovation is not going to come from BOXEE or Samsung or Comcast or Verizon. They're not going to come up with an idea for this widget or this implication. It's going to come from the promise that any developer that is out there can access the platform and develop stuff that they think is cool and that catches up with consumers. And that's, I think, what people want to see in the living room. And the fact that it's a bigger screen doesn't mean that you need to leave it in a cage on your laptop. You know, it's free and open. Anybody can innovate. And, you know, it's starting to happen on mobile devices. There's no reason why it's not going to happen on the big device. And that's only going to happen if you have a very open platform there.
>> On the other hand, TV was free all the way up until the late 70s when cable came along, and people started setting used to paying for it, and things like HBO came along. Is there any reason why the, you know, the consumer is probably sitting there saying, "Hey, now that we don't have to pay for all those pipes that are already run; I pay an internet service provider, why can't it be free? Why it can't be added support?" Quincy, maybe you could hop in on this.
>> Yeah, sure. A lot of point of views on that one. The way you have to wrap your head around this, I think, is a content company is to know don't talk about online versus TV. Call it video. And wherever it's watched, it doesn't matter where CSI is watched by Molly Wood. If it's watched on her PC, on her television, or on her iPhone. What matters is she watched it. We figure out a way to count it so metric system and data. We haven't talked about, but obviously super record this. So Nelson [assumed spelling] the referee or whoever that is involved. And that we get paid for it. Pay comes in two ways. Pay comes from carriage or retranscost of what's going on in there. But pay also comes from the advertiser. And the one thing you just have to be comfortable with is that you are probably going to see more advertising online as well or better put the same number of ads online as you're going to see on air to some extent. Three years from now you might be watching on your beautiful plasma screen television in your living room the Coca-Cola brand ad on your PC we know that actually you prefer Diet Coke. And on your phone it's on the deli for 99 cents around the corner. But until then so long as you can pack it and make it relatively indifferent, it's a question of a model. So I think the users clearly want it. There's no such thing. You say putting a genie back the bottle. You get thrown off the stage. If you--if you say the technology there. So another question is where is that business model. And as a content partner, you just think what I need to do is I know it's more eyeballs watching this stuff. I want them counted, and I want to get more money for it. And once you get comfortable with that, you should be indifferent to whatever device it goes on. But that again is the philosophy of we're not talking about TV versus online. It's just video wherever it's delivered.
>> We have some panels just to kind of zoom back a bit. We're talking about the promise now is what one thing of the attributes of this new vision is going to print best with consumers, because a lot of times when we launch something like this, there's so many moving parts. There are a lot of good things about it. We're going to also find there's a lot of hurdles to it. You can't just throw it all out there. That's a very blunt message. What one thing does each of you think is the most compelling to consumers about this kind of delivery and presentation method? Terry, start with you.
>> You know, I think, you know, for us at Verizon I think what we look at is we look at our multiple platforms. And I think the promise of a customer being able to access their content either in their living room, on their laptop, on their mobile device is, I think, is the most important thing to really evolve consumer behavior. As consumer behavior evolves then they're expectations shift. And I think that's probably the most material component.
>> So you like the everywhere message. If you had to pick one that really cuts through.
>> Multiple platforms.
>> Okay, Avner.
>> I think rather than everywhere it's everything. It's the fact that once it's connected and connected to the internet, there's nothing that you can not access. I mean, sometimes quality may not be there, but at least you have the freedom to choose what you want to watch and when you want to watch it.
>> I think for Samsung it's the ability to have the same engine, the same developers kit across platform. And what I mean by that is it's the same engine, the same internet ad TV across a TV platform or Blu-ray platform as well as an open SDK to attract innovative content developers.
>> But for consumers it's a common experience across devices.
>> It's a common experience. Exactly, it's a common experience across device. And it's also a global, global offering as well.
>> For us it's not so much that this content is online but that it's on demand, that people have control in ways that they've haven't had before. And if you look, there aren't too many examples right now of the major broadcast networks, for example, streaming their linear content online. This is really about on demand stuff and the widgets and everything else, the BOXEE Box. It's putting the consumer in control, giving them access to a much boarder selection of live array when they want to watch it.
>> And finally, Quincy, you represent no church. No extra.
>> If I, if I get to be the Cliff Notes of the four that were just before me depending on the wardrobe that they had on, I think the bottom line is choice, which is what basically everyone is saying one way across the board. And that's probably the interesting thing, you know, no matter what.
>> Let's talk about the power of this to really change the way consumers use this kind of content, because they have a certain set pattern now in terms of how they interface with their TV, their DVR, and other sorts of devices and sources. How can this expand their usage of this kind of media? Because that's always a good thing for everyone involved. More places, more time, more choice.
>> We saw that with TiVo, right? When it came along, we found that people started to watch more TV when they were able to record it. Do we see a similar sort of effect coming along with the online version?
>> If you chime in there in the beginning, keep the pressure on. If you look at stats, people are watching more television. And they're spending more time online. The best case that we could ever say for the web as new medium is fantasy football. That's the one that we at CBS always, always strive for, which is the game comes on Sunday. You start the game the Tuesday before, and you end it the Wednesday after. And when Sunday rolls around for kickoff, you're more involved in that game. You're more of a fan than ever. You're more likely to watch the game mainstream. You don't use the PC to watch the game. You use it for personalization to communicate with your other friends. And to make yourself more of a fan, you use your mobile phone for scores and highlights. As an advertiser then, Coca-Cola in this case, you get to surround the client or the customer on any screen at any time, and you extend the experience from just a Sunday event to from the Tuesday before through Wednesday after. So that's kind of the real grail. So you got to think to yourself what makes each medium different, and then know that no matter what if it's medium is video, soon I think there's going to be a world certain with Verizon and Comcast thanks to Samsung just to tie these three together. You're going to actually be watching a game on Fox, but you're going to be playing fantasy football on CBS Sports. And it's whatever the user is going to want to have happen.
>> Sam, are there other examples of things that, I know Comcast working on a lot of ways to enhance broadcast for the online platform and give you things that you couldn't get otherwise.
>> So we've been pretty aggressive at increasing the content we've got in our Video on Demand Library. I think we have something like 400 million plus views of Video on Demand per month giving that same control that consumers are finding through the web. In fact, I think there's a stat out there. We've got historically more video views from our own on demand platform than iTunes has ever had downloads of music. And it's sort of a story in the background right now. People are still watching seven hours of television on the TV set, and, you know, I know the average has got to be ten minutes or less per household in the United States on the web right now. So the balance and the money is still on that TV set today. And that's where we're focusing on a lot of innovation. If you look at 3D on the show floor here, that's going to be a big push for us. We've got an announcement here at this show about some 3D efforts that we've got underway on demand. And we'll keep raising the bars as to what content is and what consumers expectations are for the greatest experience in their living room.
>> Well, it seems like there's a huge opportunity there in terms of the augmentation that we've been talking about, because obviously consumers are not ready in large numbers to just completely dump cable. Good news for you. And that's not even what we're here to talk about. It's how can everybody get the best experience possible. And, you know, you mentioned, Quincy, programs online being incredibly attractable. But we know that with an internet connected TV from Samsung and with UBIF, which I heard all about in [inaudible]. There are these possibilities to really give consumers content that is portable, advertising that's very, very personalized, and the opportunity for all the choice that Avner wants. Right? Can we get that from Comcast? Is that possible? For maybe like 40 dollars a month?
>> Or less. I'll talk to Disney, CBS and the rest of them.
>> Yeah, wait. Save it for the hurdles section of this.
>> Speaking of the hurdles section, that's an excellent turning point I think right now to go to that, because let's face it. Every time we talk about the potential of anything like this, you always tend to get pulled into, "Yeah, but this may be a problem. That may be a problem." Let's just get right to it. Let's take a look now at a video that's going to explore the manifold issues that could and have already arisen in this march toward IPTV. Check this out.
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>> The promise of watching any video you want on demand anywhere you are certainly captures the imagination. But like all technology, there is the promise, and there's the reality.
>> Right now you can get streamed video from multiple sources, and the selection right now is wanting.
>> Sam Duvall says one problem getting video on the internet and keeping it there is an outdated distribution system.
>> The studios and TV networks have a system call what they refer to as window. You have your theatre window where movies are released only in the theatres. You have DVD sales. You have broadcast television. And there's nowhere to put the internet.
>> Is it even possible to get all your video online? Joel Yarmon got close using a hand full of devices and a wealth of sites and services, but he still doesn't get everything.
>> You know, I probably miss out on live news, some live sports.
>> And even when you find the video you want, downloading or streaming can be slow and choppy especially on a mobile phone where usage caps are strict and service often spotty. Sam Duvall thinks the solution is better compression.
>> Those algorithms are improving everyday. It's not going to be too much longer. A couple years before you're going to be a able to download an HD movie very quickly. We'll be talking minutes now instead of hours.
>> But even if we have the bandwidth, there's still other restrictions.
>> Move rentals expire 24 to 48 hours from the time you begin watching them. And DRM restrictions irritate some consumers.
>> When you purchase video from iTunes or Amazon, they are both DRM. And you have to choose carefully how you want to watch that program. I want to be able to just purchase video and watch it wherever I want to watch it; on my laptop, on my television, or my phone.
>> In the end, to get by with IPTV is easy. Just get multiple devices, sign up for several services, and in some cases buy multiple copies of your movie or show. And don't have obscure taste. That's all you have to do. Or there's another option that can get you almost every TV show and movie ever created played on any deice you own and delivered quickly after premiere, sometimes even before. It's called piracy. And its illegal.
>> Can I watch everything I want to with the knowledge that, you know, it hasn't been pirated yet? Maybe. Maybe not.
>> For decades now, Hollywood has had control of the way films are distributed. That's over. It's a simple fact. Anyone can now make a copy of a film and distribute it online and send it all over the world. That's the world we live in.
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>> Alright. Well, Tom.
>> Well, it's you know--that's the big competition here, right, is piracy. Because it only takes one copy to sneak out there, and then it's an infinitely copyable universe.
>> That's propagation, yeah.
>> So how do you guys--you know, the music industry has been fighting this for a long time, and there's a lot of new ideas in video for fighting this. What are some of the best ways to compete with piracy but still not annoy your audience, because, you know, that's what we saw here is the folks saying, "Well, I want to be able to just buy it and play it on whatever I want." Most people don't want to do anything illegal with it.
>> I'll say something radical to that to kick it off, because we're in Las Vegas, and it's due for radical time. The best way to avoid piracy based on pure fact of numbers in the last two years is to make it available in a safe, clean way anywhere so it's easier for people to do it. Pirates, touring sties are still a pain in the ass from a consumer perspective except for downloadable client. You've got all kinds of spyware all over it. They'd rather do it pretty simply and cleanly on iTunes or BOXEE or whatever so long as it's made available. So that's the true irony is nine times out of ten the lawyers or the rights owners of the studios that are fighting this so much, they're going to put themselves in the self where piracy in US television has gone way down since everybody's made it available. So the simple answer to combat piracy is to actually make it work for the consumer.
>> Lets go to the audience and get a quick vote on what we just saw, some of the downside of this rosy, wonderful world we're trying to paint for you here. So what do you feel is the biggest obstacle to watching TV online? Very simple question as was laid out in the video. Is it a bandwidth issue? Is it selection? Is it DRM and all that rights management that makes you have to buy several different copies for different devices in some cases? Or are there no problems, just let's not talk about it? Give us a choice. Number 1 if you think bandwidth constrictions are the problem, 2 selection is too spotty, 3 DRM is a hassle, or 4 piracy is already well and good.
>> That's not what four said.
>> Now we have a second question. Who is most at fault for the obstacles that lie in front of this vision? Is it the movie and TV industry, the ISPS that lie between you and the content, the device makers who are still on early sometimes clumsy stage, or the viewers who are out there, you know, wanting too much? Give us your vote on that.
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>> Okay. Let's take a look at what you said in the room. Our first results come back from this question about obstacle. Very few of you saying that there's no problem. So good. At least we got an honest room here. A lot of honest people. And then again a pretty even spread across bandwidth and selection of content. I think a lot of us have felt that if we've had any experience at all with the initial offerings in this area. And DRM too, I think we're kind of surprised is somewhat light turnout there on that answer. I think amongst us, certainly in the CNET editorial crowd, we feel like DRM is a real hassle. Here's the web results from the CNET users. Far and away, bandwidth is the issue there followed up by selection, DRM, and a little different number on the piracy ink if you will. Let's go to the results of the second question that would be here. This is a second question for the web. There we go. On the internal vote here in the room we've got movie and TV industry far and away taking a beating for being the ones that have not allowed things to happen properly, easily, and with low friction. And then really minimal turnout for anything else. A little bit of a slap going to the ISP. I'm a little surprised by that to be honest. And device makers and the viewers pretty much get a pass. Now let's go check out the web results on that same question. And there we have again, wow, movie and TV industry content creators and rights holders are taking a beating on that one. And ISPs are right behind them, and then a minimal call in for the device makers. So Samsung, wiping its brow. Good. This, of course, is getting us into now the deepest part of our discussion which is how do we address these many hurdles. And there are so many of them. Where do we start?
>> Well, it's interesting that DRM not as big of a deal with video. And I think that's true, because it's less about portability than it is with music. It is about portability. We heard people saying, "Hey, I want to watch it wherever I want." But as long as it plays, it's not as much about like moving mp3s around. If they can stream it, and they've got a good internet connection, and they can watch it on the phone. That's good enough, right? So, you know, let's bracket up the DRM side of the question. How do we get around this old distribution method that we talked about in here and make it easier for folks to get the TV shows and the movies that they want and get to that where we were talking about in the promise of the on demand world? Maybe Comcast has some ideas.
>> Avner, I know, Avner, you've fought some of these battles about selection. Right? Because obviously we know the bandwidth is just a big constraint right now.
>> I don't think the bandwidth is such a big issue actually.
>> It might be that people have a misperception about what they can and can't do, right? You know, if they're talking about downloading--what did Bono say, the entire season of 24 in 24 seconds. They know the can't do that. But, you know, I think honestly if people are trying to just replace any kind of paid TV with the web, they're going to run into a huge selection probably.
>> Right, the selection is a big issue, and I think that's the biggest issue actually. DRM is annoying, and it's useless. But it's there, and, you know, I guess we need to have it for a while. But the biggest issue is the fact that I think it's a business problem, and that's that there's, you know, 120 billion whatever, you know, it's too many zeros for us, but a lot of money on the table. And maybe companies don't want to risk existing business models. They're very lucrative for them. And the cable companies don't want to see more competition if they don't have to. And between those two, it makes it very hard for content to find itself online. And I think, I think it's a short-term issue actually. I think what's going to solve it is everywhere here, in the audience, and the 18 million users of CNET, and consumers are just there. And I think as Greg mentioned, at the end of the day if you're making content, you want to be where the user is. And if the users are on the internet, if they're willing to pay, if they want to watch your show, at the end you'll have to offer it to them. So I think it's a short-term issue. I think it's going to get resolved. It's going to be painful for some, but we're patient. And I think it's going to get there quicker. And piracy is keeping us honest in that regard is that there is this, you know, we're trying. We're going to try and put artificial barriers around the content. That's just not going not work. The best way to fight it is as Quincy said make it available. And the industry needs to do that. And I think users will be willing to pay. The users are not the issue. The industry is the issue.
>> Terry, just about choked when Avner said DRM has no role in this. Let's just throw that out. I saw you kind of [sound effects] catch yourself there. What was your reaction?
>> Well, my reaction is having dealt with the license source of the content. That's pretty much my life most of the time except for my five kids that, you know, they've invested so much money in the content. Monitorization is so important that they've got a material vested interest in protecting their asset and making sure that there is some sort of return on their investment in the content. So we keep hearing free. We say well, free sounds--free sound great. But, you know, at some point I think, you know, It's a well trotted path so far through the panel. You know, somebody has--somebody has to pay for it. So we all like to have things for free. I'd like to be able to have a BMW for free, but we understand that there is a value proposition with just about every good service that we use. But somehow content is different. And it shouldn't be. And at Verizon what we look to do is we try to--we enhance our platform so that our customers can enjoy the content in the way that they want to enjoy it in a better--in a better way. But, you know, we certainly don't--our content providers aren't coming to us and saying, "Look, Verizon, we love your platform. We love your open development for your widgets. That's great. You can have our content for free." It's just--it's not how it works. I'm not saying that's right or wrong for anybody, but if there is a group of content developers in the entire value chain whose investing their--they're investing their time and money, they have to be in a position where they can get that return back.
>> I think DRM doesn't conflict with free. DRM is just the penalty that you pay if you're an honest customer. Today, if you, you know, if you downward from [inaudible], you can do whatever you want. If you pay for it from Amazon or from iTunes, you're limited. So you're punishing your best customers. I don't think that's a good--that's a good idea. Also, you're protecting an asset that, you know, you'd like the digital DRM and, you know, algorithms to encrypted while there is all this analog loop hole. You know, it's open. Enough that's one copied for it to come out, and it's going to be out. I don't want to make it about DRM, you know. We don't support DRM in BOXEE unfortunately. You know, it's--it's part of the game. We don't have any as a company. You know, my personal views aside, as a company we don't have a strong opinion about DRM. Is that necessary?
>> Now wait a minute, how did music industry get to DRM free distribution relatively quickly? It's kind of a painful path, but we've largely gotten past DRM on music download services and purchase services ? Why isn't there a lesson that can be applied directly from that what we're talking about here? What are we missing between these two media types that's different? Anyone want to take that and say, "Yeah, there is a difference."?
>> Yeah, as the first. The problems are logical, right? If you look at this as a stack, the first layer is will users like the choice to watch it anywhere, anytime on anything? Yes, always a constant yes. Second; is the technology on the devices, and is the bandwidth available to make it happen? Finally, yes. Ten years ago though, if we'd freed up all the rights and the content and had it all available but it still sucked as performance to get to it, you'd be screaming at these guys. So logical that that's the next thing that gets fixed. Now it's the contents term. And for a content guy to say, you know, we have to protect it is defensive and dinosaurous. If you say we want to expand a business model that is already working; i.e. the 20 billion, 120 billion dollars of television which applies to the future of television and video and expand it online; that's a business model that'll work. Doesn't matter what screen you watch it on. What matters is that you watch it and get paid. Then we're talking. And that's the elegant solution of TV everywhere and so many things that are really being proposed. That's why we embrace them as content owners. We know it's getting there. The question is how do you create the business model around it? With respect to the music industry, I always have a problem with that comparison, because it could be that a two minute song of Beyonce kills for 99 seconds, kills a 17 dollar album of Beyonce. Two minutes of CSI streamed on Fancast is the greatest thing that could ever happen to CBS network on air, because it encourages a whole new group of demographics to watch a show that doesn't necessarily jog with them. So we're in a different situation there. The other thing I'd say is music came off on DRM a lot faster, because they had DRM issues in the beginning, because the bandwidth was so tough that DRM was going to be a problem. But for us, it's not a bandwidth issue as much. So at DRM, we don't care as much about warping with that kind of stuff. We care more about making it get the metrics, the data, and making sure the advertisers are comfortable.
>> So you're talking about streaming two minutes of CSI instead of making CSI available on Fancast. I mean, Sam, you must feel a little frustration. Because on the one hand, we're sitting over here talking about all your consumers abandoning your service. And on the other hand, you can't get the rights of the content that would keep them on things like Fancast and some of the efforts that you've actually made to make that content available.
>> We're doing pretty good on rights I think at least online. You know, I think we have hundreds of shows, thousands of shows available on demand on TV set. And we keep adding good 25 networks now including CBS that deals with us to make their content available to our subscribers online for no additional charge. It's as Quincy says, it persevere the business model that the content owners--
>> Expands. Yeah. Expands the business model that content owners already have. They want to follow the consumers. They don't want to be threatened by piracy. And they know that their revenue model is dependant on the subscriptions that consumers are already paying. And if they can keep that together, I think, it's a win, win, win for the consumers, the distributors, and the content owners.
>> Dan, do you--oh, sorry.
>> No, go ahead.
>> I was just going to ask if you see yourself as almost content agnostic at this point? Are you just kind of making stuff and waiting for it all to get out?
>> No, we're playing a big part with our content partners. Yes, we are agnostic. But we have the platform to support creativity for, you know, two things the audience brought up. One was the bandwidth that was required. So we're working with smart things like adaptive streaming. So regardless of your bandwidth if it's DSL or if it's cable or Roku Fiber, we can show up to full HD. We have voodoo in our booth .we have Amazon POD. And as far as content selection, tens of thousands of movies are available on demand as well as TV shows as well. They're for purchase, but they are available. And it's that wide selection. It's that on demand element that really makes it attractive.
>> And what is the box? What is the thing that is going to end up--I don't think anybody thinks we're there yet. But what is it that is going to push everyone towards IP delivered television? To what Quincy was saying earlier, it doesn't really matter what cable it's coming over. It's coming in, and it gives us that infinite selection and inner activity. Do you have any insight into what that might look like eventually?
>> I'm certain innovation takes many shapes and forms. The platform is there. The innovation is there. The bandwidth really is not--it's a non-issue today. You know, there's some great services out there today. So--
>> Is it a separate thing we're going to have to have? Is it a set-top box from Comcast? Or is it something built into the television?
>> You know, video is distributed in many ways. You know, there will be over the top. You know, at Samsung we don't see traditional video providers going away. We don't see the platform as, "Oh, no, we're going to become a video distributor." It's really open in nature. We have other devices, obviously many other devices aside from TV. So we're very happy to have content providers and studios to have content, you know, from the cloud stream down to many devices.
>> I think the ideal for people probably would be I buy my TV. I plug it into the wall. That's it. I get everything I need. I don't have to have any additional devices. Now BOXEE right now is moving from the software to having their own box, but long term--is that something that you could--is that an arena you could play in being sort of a TV firmware?
>> Yeah. I mean, the BOXEE Box by D-Link is the first device by our first CE partner. The goal is to get ourself to embed into Samsung, Panasonic, Toshiba, Sony, Blu-ray player; any device that is CP Unit or remote controlled; we'd like to see BOXEE running on it. So we're agnostic hardware. We're a software company. And we think that the future of, you know, where it's going to go is that you probably are going to have one strong CPU in the living room. It doesn't make sense that today you need to have five boxes with CPUs connected to the same screen. So the problem is there's going to be consolidation over there. I don't know if embedded in TV is the best idea overall, because you if pay--people replace their TVs every five to seven years. That's a number.
>> Yeah, so your PCU is going to get old after, you know, probably 18 months to a year. So at Samsung, if you bought a Samsung TV for 1500 bucks, and two years later the CPU is old, you're probably not going to replace it. So they need to make it, you know, plug and play that you can have some sort of something that you can just replace the CPU. But otherwise, I think that the battle is who is going to own the CPU, and who's going to own the user experience
>> Just to comment again on your question and dub tail what Avner is just saying. BOXEE is a good example how a device if adopted well by users, and he's had stratosphere crew. If out of nowhere you have to pay attention to it, does trigger a room full of lawyers to think differently about the window system. The other example uses a microcosm, and I can't say it too loudly our else maybe everybody thinks it again and goes back. But I remember three years ago, it was really difficult to get portable content, certainly mobile content, whole different set of contracts this big in 19 other meetings and conference calls you never want to participate on as a content company. But all of a sudden, the iPhone comes around, and all it does is plug into iTunes, and everybody's got it. Is that not a mobile phone? I'm not aware. Again, don't say it too loudly, because you don't want to like distract the industry to rethink all of it. But all of a sudden mobile rights just went out. Not many people picked up on it, thank God. But all of a sudden you have mobile rights out there boxed in with IP rights. That's a good thing. Now we just got to jam it up into the television.
>> So are you saying we're going to get there? Because I feel like made available actually still is the biggest sticking point, because there isn't--you know, there isn't quite the selection that people want whether it be streaming or on demand. And you still have to pay more than once to get content across multiple devices. I mean, right now if you want to buy that content from iTunes, you've already paid for it if it's a TV show that you watched on television, or you've already paid. You know, if it's a digital version of a movie that you bought that you could also pay to watch on HBO. I mean, you know, I think we still have people paying a bunch of times for content that just isn't broadly available even if they're willing to pay.
>> I agree. It's the biggest issue. I mean, today I think the stat is that only 50 percent of broadcast content is online. Less than 10 percent of cable content is online.
>> 53 and 8.
>> 53 and 8. Whatever. And that's just, you know, that doesn't work for the consumer. The consumer doesn't care. He cares about the show. He cares about the content. He wants to get it. I think he's willing to pay for it. The industry just needs to make it available. So I think we're at the stage where technology is not an issue. I think the device is not an issue. DRM is not an issue. The only issue is making the content available. That's the only issue.
>> We talk a lot abut how we're going to get to this universal devices where internet content, air content, cable, satellite, whatever it is just looks like channels without numbers, just brand channels. And, you know, I'm skeptical of that. In at least the early efforts that I've tired using devices whether TV, DVD player, set-top box. An you bounce between different services and their widgets and their apps, whatever you want to label those as. You Jump in and out of different worlds, completely different interface, just chaos out there as you go between these buckets of channels. Doesn't that need to be sorted out somewhere? Don't we need some kind of common look and feel so the gas pedal is always on the right whenever you go to any of these services that will come and go through these very malleable devices? Or can we just leave it out there to have everyone have a different interface? I mean there was a time when websites all looked very different. Now they've all got nabbed on the left. Some commonality happened just by practice. Do we need that?
>> I don't want to take over too much of the conversation. But, you know, the way I see it is that it's very similar to the internet. You know, anybody can create this own experience, but there is a still a role for aggregators. And part of the value of aggregators is duration. Part of its making it just that it's consistent so you search in one place, and you get all the results. And it's a give and take. So someone can go to Hulu and get a show, and they can go to CBS and get--or, you know, can go to NBC and get the same show. And they can make that choice online, and I think there's no reason why you shouldn't be able to make the same choices on TV. And there's services like TV dot com that aggregates TV shows from everywhere, so you can find everything there. And there's Clicker, and there's more of these, and BOXEE is doing some of that. So I think that's where it's going to go. It's going to be a combination. The key is that none of us here on the panel need to be thinking that we're to be the one that are going to solve it. We just need to be in a position that there is a platform that enables anybody to take a shot at it.
>> I got one more hurdle that I want to throw out there, and I think this kind of goes back to what we're talking about with the music industry getting off DRM. They had a single format that everybody agreed to, mp3. And yeah, Apple went with AAC, and it's a little different. But mostly mp3, everybody understands it. It works on everything. We don't have that with video. Is that something we need to have? Is it something that we should try to push as an industry to standardize on? And would that help in this conversation that we're having in here to get around some of these issues? Or does it not matter because we're going to go to world where it's all broadband anyway, and it's all streaming? So as long as it's embedded we don't really care about compression and codecs. Quick thoughts on that.
>> Doesn't matter.
>> Yeah, so I think codecs are here. It's a reality. It's something we have to deal with at Samsung. We support multiple, you know, tens, dozens of codecs. You know, would it make our life easier if there was only one or two? Sure. It's unlikely, because, you know, all different codecs have different capabilities. I think it's just something we have to deal with.
>> So in the end it's still just lawyers. Next time we need to get bunch of lawyers on our panel.
>> Alright, folks that's all the time we've got. I want to thank you for joining us for The Next Big Thing. Let's have a hand for our panel. Let's hear it for Terry, for Avner, Dan, Sam, Quincy, and my colleagues Molly and Tom. Thank you so much of joining us. Don't forget there's a lot more going on at the CNET Stage which is the upper level of the South Hall including tomorrow 10 a.m. We will announce the nominees for the best of CES Award. They are the official awards for the show. And at 11 a.m. on Saturday is the presentation of the awards. Ten categories plus peoples' voice and best in show. So we'll see you at the CNET Stage tomorrow, the next day, and throughout this week while you're here at the show. Enjoy your CES. Thanks for joining us.
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